Below the Radar: AmeriCredit Gives Credit Where Credit Is Due

Who would have thought that financing a secondhand Geo Storm or Plymouth Prowler for consumers with dicey credit could become such a big -- let alone profitable -- business?

Believe it or not, though, subprime loans for used cars are indeed a huge business, and Fort Worth, Texas-based AmeriCredit(ACF Quote) has become one of the leaders in this space. AmeriCredit gives loans to those with poor credit -- be it from delinquent payments, unpaid medical bills or other financial problems -- in exchange for charging hefty interest rates. Approximately three-quarters of its loans are for used-car purchases, while the rest are for new vehicles.

Unlike a number of subprime lenders that went out of business in the late 1990s, though, AmeriCredit has found a way to reduce its risk on such loans through a proprietary database that looks at up to 200 different criteria to determine a potential borrower's creditworthiness. ...