Credit Scores Strengthening
Banks are licking their lips over the reduction in the number of Americans who are considered sub-prime borrowers. The Wall Street Journal reports:
The share of U.S. adults with credit scores that are considered “subprime” fell to 20.7% in April, the sixth consecutive year-over-year decline and the lowest level since at least 2005, when Fair Isaac Corp., or FICO, started tracking the data. The ranks of subprime borrowers swelled during the financial crisis, peaking at 25.5% in 2010 as mortgage payments, credit-card bills and other debts went unpaid.
The improving trend could bring relief to big banks, which tightened credit standards in the wake of the crisis. An increase in more-creditworthy borrowers could allow them to increase lending without lowering standards. Banks are desperate for revenue growth since the same superlow rates helping borrowers are also squeezing their own profits.
“It will have a positive impact on loan volume, loan growth and revenue,” said Morgan Whitacre, consumer client underwriting executive at Bank of America. Credit-card and auto lending would be the first type of loans to benefit.