Recently, many experts have noted that credit conditions have been improving considerably, and that trend has not gone unnoticed by major lenders. As a consequence, subprime borrowers now have considerably more access to new lines of credit.
New data from the credit scoring bureau Equifax shows that lending to subprime borrowers increased 41 percent in 2011, rising to a four-year high in December, according to a report from MarketWatch. Further, this trend continued into the first quarter of this year, as lending to those with credit ratings between 601 and 700 jumped an additional 21 percent on a year-over-year basis, the largest such increase seen by Experian, another credit reporting agency, since 2008.
These changes are quite notable because of how closely financial institutions restricted lending across all credit profiles during the recent recession, but have continually made it more available as the economy has improved, the report said. Now, lenders are seeing significantly less risk that consumers will default on their accounts.
For instance, the risk factor for a card default has dropped appreciably from the 7 percent in 2009 to just 3 percent now, the report said. That is, of course, still much higher than the 1 percent rate observed prior to the recession in 2005, but nonetheless remains a significant improvement.
"Someone who has a credit score of 700 has had a pretty good shift in how likely they are to default," Sarah Davies, senior vice president of analytics and product management at VantageScore Solutions, told the site. "The world has gotten better and risk has calmed down."
As a consequence, the issuing of new cards to subprime borrowers has increased to 24 percent of all accounts last year, and into this year, the report said. That's up from 22 percent in 2010.
These slackening credit standards are not especially surprising given that all of the nation's major card lenders have been reporting fewer instances of both delinquency and default in nearly every month for more than a year. Now, both these rates stand at all-time record lows, though experts caution that there must be a point at which they logically bottom out and once again begin to increase toward historical averages.