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Credit card companies increase offers to fair-credit borrowers

By , CardRatings contributor
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Banks have started approving more credit cards for fair credit, even as extended unemployment has caused Americans' average credit scores to drop slightly. That insight comes from TransUnion's quarterly analysis of new credit card applications and credit card delinquencies, released to reporters earlier this month. Although credit card delinquency rates had dropped to historic lows during the first half of 2011, the credit reporting bureau's latest data indicates a slight uptick in the number of Americans who fell a month or more behind on their minimum payments.

The third quarter delinquency average crept up to 0.71 percent, an increase from Q2's 0.60 percent figure. However, this 0.71 percent delinquency rate is lower than the rate from the same period in 2010.

Residents of Mississippi, Nevada and Alabama struggled the most with their monthly credit card bills, while North Dakota, Alaska, and South Dakota experienced delinquency rates of only about two-thirds the national average.

Rising delinquency contributes to falling credit scores

TransUnion Trend Data also showed a slight shift in the market for new credit card offers. Banks offered more than a quarter of the nation's new credit card accounts to consumers scoring below 700 on TransUnion's VantageScore scale. That's up more than 2 percentage points compared to the same period in 2010. This rise in more card offers to individuals with fair credit was accompanied by a drop of 5 percentage point in offers for consumers scoring higher than 800 on VantageScore's 501-to-990 scale.

In a statement to reporters, TransUnion vice president Ezra Becker called out the upside to the report's findings. "Those consumers who are most affected by the continuing tough economy are gaining better access to the credit 'breathing room' they need to make ends meet," Becker said.

He noted that the U.S. Bureau of Labor Statistics had already adjusted the way it calculates unemployment reporting to reflect this year's unusual job market. TransUnion researchers projected an upward trend on delinquency rates through the holiday period, based on consumer sentiment and anticipated gross state product amounts.

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