Consumers With Lower Credit Scores Gaining Attention From Card Companies

Thursday, December 1st, 2011

Credit card companies are looking to drum up new business among consumers with less-than-stellar credit histories. This is a change from the recent past, during which card issuers focused their attentions only upon individuals with near-perfect credit.

After months of making special efforts to court only the most creditworthy consumers, some credit card issuers are changing their tactics and going in pursuit of customers with mid-range credit scores and imperfect credit histories. In fact, data indicated that there were more new lines of credit issued to consumers with spotty credit histories than to those with excellent credit ratings.

TransUnion, one of the three major credit reporting agencies, revealed that 25.2% of new credit card accounts were opened by individuals with a credit score of 700 or lower, an increase from last year’s figure of 23%. Essentially, what this means is that a large amount of credit cards – nearly a quarter of a million – have been doled out to consumers who have had some past struggles with credit.

This new availability of credit for financially-challenged consumers marks a sea change in the industry, as TransUnion reported that last year close to $8 million consumers had abandoned the use of credit, either willingly or because they had their lines of credit revoked. Because during the previous few years opportunities have been scarce for consumers to open up new lines of credit if their credit report indicates any past struggles with credit, many people are currently clamoring for a new account.

Rather than abandoning their pursuit of top-tier credit rated consumers, card companies are instead making their offers for the especially credit worthy increasingly enticing, by amping up rewards programs, extending teaser promotions and slashing interest rates. According to Synovate, a market research firm, around 80% of new card offers are targeted towards consumers who carry top credit scores.

However, data indicates that those upper echelon creditworthy consumers aren’t necessarily in the market to open up new accounts, as they already have plenty of credit available to them.

“If financial institutions are going to grow, eventually they’re going to have to dip their toes into the water of riskier borrowers,” claims one financial analyst, according to The Huffington Post.

This entails issuing cards to consumers who are likely to carry a balance from billing cycle to billing cycle and accrue interest charges.

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