Credit Card Companies Cautious In Courting Customers
Back during the boom years subprime issuers, who focus on people with low credit scores, were expending up to better quality, and super prime issuers, who focus on people with high credit scores, were expanding down to get more people.
Today, however, there is a so-called dead zone in the credit card market for customers who have neither really good nor really bad credit but something in between.
Credit card companies have resumed energetically targeting customers with especially good credit scores, and even turned back to the customers with bad credit scores. But at the same time they are unwilling to reenter the fair credit market because they lost money on these customers during the recession.
There is an element of uncertainty about the people with fair credit: some people won’t pay you and some will pay. When the economy was in good state these customers did well, so issuers felt more assured and comfortable with them. But when the economy fell down, suddenly there was much more inconstancy in how they performed, and a lot of issuers singed their wings and left that part of the market.
Now most credit card companies prefer to stay with big banks focused primarily on the customers with excellent credit and the others left focused on the customers with bad credit. But still there are some issuers serving the fair credit market, not very many though, and the lack of competition leaves consumers short of options.
The lack of competition is a result of various bank acquisitions that have occurred in recent years. Credit card companies previously active in the fair credit market retreat after acquisition due to the contracted terms and conditions.
Fair credit market includes borrowers with a FICO score between 620 and 659 (it may vary though). FICO score is a figure calculated by the Fair Isaac Corporation to determine a consumers’ credit worthiness. According to the Fair Isaac Corporation 22% of Americans score between 600 and 699, while the median is 710.
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Once your credit score crossed the “fair” line, on the one hand, you may feel a sense of relief, since you finally got out of bad credit. On the other hand, good credit may still seem so distant.
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