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Strong Growth in Subprime Credit
Posted November 12,2014 by CUNA Economics

Consumers not willing to overextend.  

“New credit growth for bank- and retail-issued cards is strongest among subprime borrowers,” according to a recent Equifax press release

Subprime borrowers are defined as those with a risk score of 660 or lower.   

“As the economy improves, consumers appear to be ready to expand, or in some cases, rebuild their credit,” says Senior Vice President and Chief Economist at Equifax, Amy Crews Cutts.   

“New credit card accounts for those consumers with a subprime credit score have shown more than a 40% increase to date this year over the same time last year.  This reflects consumers’ appetite for new credit, and lenders’ willingness to offer it.”  

Despite taking advantage of available credit opportunities, consumers seem reluctant to overextend, “they are hesitant to take on new debt,” as although new accounts grow, balances in both the prime and subprime markets have grown very little, says Equifax.  

Key takeaways from the report regarding bank issued cards:  

  • Loans outstanding are at the highest in five years, at more than 325 million;
  • 28.8 million new cards have been issued year-to-date in July.  This is up 21.3%.
  • Balance of available credit exceeds $2.56 trillion; a five-year high.
  • Write offs as a “percentage of total balances outstanding in September 2014” dropped 15.9% from the previous year, at 3.48%.
  • New credit limits year-to-date July 2014 is 28.8 million, which is up 21.3% over the previous year and a six-year high.  

Retail-issued cards reveal growth trends also:  

  • Loans outstanding for September 2014 exceeds 195 million—the highest since January 2009.
  • Total outstanding balance is up 6.7% to $59.6 billion from the previous year.
  • Newly issued cards year-to-date July 2014 is 21.7 million, up 2.7% from the previous year--and a seven-year high.
  • Write offs as a percentage of all outstanding balances is 7.04%, down 3.5% from the previous year.  

Meanwhile, all credit card loans outstanding at credit unions are up 0.1% in September 2014, according to CUNA’s Monthly Credit Union Estimates for September 2014.  

And, nationally, growth rates of credit card balances at credit unions stand at 8.4% as of June 2014 (annualized), a steady increase since 2010 when growth rates were at 3.1%, 2011 with growth rates of 3.9%, 2012 at 5.7%, and 2013’s 7.7%, according to CUNA’s U.S. Credit Union Profile, Mid-Year 2014.

 

Related

Subprime Auto Bubble?   

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