Magazine article American Banker

Going Upmarket

Magazine article American Banker

Going Upmarket

Article excerpt

Byline: Harry Terris

After eroding amid ballooning job losses, the credit profiles of customer rosters at major card lenders have generally recovered, and in some instances become stronger than at the beginning of the recession as issuers cull the ranks of their customers.

The pivot to borrowers with better credit histories appears to have been particularly sharp at Bank of America Corp., which entered the recession with a smaller proportion of high-score customers than some of its peers, and suffered the worst deterioration in loan quality among the nation's six largest issuers.

For most big issuers, the percentage of securitized loans to borrowers with FICO scores below 660 - a range sometimes termed "subprime" - rose from late 2007 to early last year, while the percentage of loans to borrowers with scores above 720 fell.

Initial jobless claims peaked in March 2009, and customer portfolios reflected an accumulation of missed payments by troubled borrowers that damaged their credit histories. The rebound in credit scores in recent securities filings appeared after issuers implemented aggressive steps to tighten loan standards - including targeting offers of new cards to people with higher credit scores than in the past - and charged off bad accounts in large numbers, purging them from the books.

B of A has outlined a business model overhaul that includes cultivating cardholders who have deposit and other accounts at the company and producing more transaction income relative to borrowing. …

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