Credit-Card Use Increasing Among People with Low Scores

If you’ve noticed that it’s getting easier to get a credit card a and you’ve been receiving higher credit limits, you’re not dreaming. The credit card is coming back, even among people with the lowest credit scores. Although things might have gotten a bit tougher for churners.

In the second quarter, total household debt increased by $35 billion to $12.3 trillion, according to the New York Fed’s latest quarterly report on household debt. That increase was driven by two categories: auto loans and credit cards.

Auto loans have been steadily rising for the past six years, but the rising credit card balances are the news here. Credit cards are even returning among individuals with low credit or subprime credit scores below 660. Among people with credit scores between 620 and 660, the share that had a credit card rose to 58.8% in 2015 from a low of 54.3% in 2013. Among those with scores below 620, the number of people with a credit card increased to 50% from a low of 45.6% two years ago. Both figures for 2015 are the highest since 2008.

By contrast, about 88% of people with high credit scores have credit cards, a figure that has changed little over the past decade.


The report also “highlights a positive ongoing trend in household debt,” said Donghoon Lee, a New York Fed economist for WSJ. “Delinquency rates continue to improve, even as credit has become more widely available.”

Less than 1% of credit card balances are 90-180 days delinquent, the lowest on record in data going back to 2003. Severely derogatory balances, including those that have been written off by banks, are at 6.2%, near the lowest levels in the available data.

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