Subprime Credit Card Limits Reach 5-Year High
Total credit card limits for the subprime market reached a five-year high during the first half of 2016, according to the Experian Market Intelligence Brief. These limits are now at $6.4 billion for subprime and deep subprime cardholders.
This follows the trend the Federal Reserve Bank of New York noted in August. Their survey found nearly half of subprime borrowers now have a credit card, which is quickly approaching pre-recession levels (60%).
Despite the increasing card limits and card availability for subprime borrowers–defined as those with credit scores below 620–the delinquency rates for credit cards has declined since 2011. The delinquency rates for subprime borrowers during the past 12 months are up 7%, but over a five-year span, they have actually dropped 6%. Overall delinquency rates across all markets have declined by 43% from the second quarter of 2011 to the second quarter of 2016.
The states that saw the highest improvement in 60-day delinquency rates were Washington (down 33%), California (28%), Oregon (27%) and New Hampshire (26%).
The credit card industry isn’t the only category benefiting from subprime borrowers. Experian’s second quarter automotive report revealed subprime automotive lending has experienced “steady growth and remarkable stability.” Subprime and deep subprime accounts make up 22.8% of auto loans for new and used vehicles, and 30-day delinquency rates are just 2.22%.