A new study carried out by the Federal Reserve Bank of New York shows that many subprime borrowers are opening new credit card accounts at rates not seen since 2007. Credit card use has been on the rise since 2009 and is seen as a sign that the economy is improving. More and more of these accounts, though, are being opened by subprime borrowers, those risky consumers with a credit score below 660.
Subprime borrowers were most affected by the recession, and many closed their credit card accounts in an attempt to cut down debt. In 2010 and 2011, almost half of credit card account closures were by those in the subprime category. This group is now seeing a resurgence, and credit card usage is almost back to the level it was before the recession.
Although more of these less trustworthy borrowers are opening credit card accounts, it is important to note that few are receiving large amounts of credit. In 2015, the average credit limit for a subprime borrower was $1,000. The average limit for someone with a credit score of over 780, was $8,000.
Good credit is being rewarded, while lenders are being cautious about those who show a risk of defaulting on their bills. The bulk of credit being issued is going to those with scores above 720.
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