NEW YORK (MainStreet) -- If you're a subprime borrower -- meaning you're a higher credit risk to credit card companies, mortgage lenders and other creditors, and that you have a credit score below 601 -- now is the time to apply for that new piece of plastic.
Why? Because credit card companies are more lenient these days about approving card applications from consumers with weaker credit.
That's the opinion from TransUnion, the credit reporting giant based in Chicago. TransUnion reports that credit card approvals "have increased to subprime borrowers" in the second quarter of 2015. What's more, even with new approvals to consumers with lower credit scores, credit card delinquency rates "remain low," at 1.19% for the quarter.
One downer for subprime credit card holders -- the average new credit line for such borrowers has sunk below $1,000, to $923, TransUnion reports. That's the lowest level in three years. Overall, though, the news is good for credit card consumers with weaker credit, with their numbers rising from 11.1 million in the first quarter of 2014 to 13.1 million in the first quarter of 2015. That's out of 160 million U.S. credit card customers, the company states.
"Subprime consumers continue to gain access to credit, but lenders have scaled back the average new credit line for this group," notes Paul Siegfried, senior vice president and credit card business leader for TransUnion. "Distribution of originations across risk tiers has remained relatively steady in the past year, indicating that lenders are deliberate and approaching subprime originations cautiously."
If you're a subprime borrower in the market for a credit card, now is the time to strike, while the proverbial iron is hot. "Subprime borrowers are great business for credit card companies," says Andi Wrenn, an accredited financial counselor who works with low-credit consumers. "They are typically the people who use their credit cards, pay the minimum due, and the companies make great interest off their spending because they rarely pay their credit card in full."
"Who wouldn't want to earn 24.99% APR off these folks?" Wrenn added. "They are often living beyond their means, and just aren't able to keep up with their bills."
One great way to get a credit card fast, and in a relatively easy fashion, is via a secured card. Some consumers may turn their nose up at such cards, but the benefits are abundant for consumers who have trouble getting a traditional credit card. According to CardHub.com, approximately one-third of all consumers can't get credit cards that offer 0% financing and rewards points, as those cards are reserved for consumers with stellar FICO scores.
Some secured cards, though, can offer consumers decent benefits. Consider Western Sun Federal Credit Union, which offers an 8.75% APR and no annual fee. Or on the bank side, Merrick Bank's no annual fee secured card with a 17.45% APR is the best offer among banks.
"Secured credit cards are a reliable and cost-effective tool for credit building, especially for the subprime segment," notes Jill Gonzalez, a financial analyst at CardHub. "You can be pretty much assured of qualifying, regardless of your credit score, as long as you have at least $200 for the refundable security deposit. And because this deposit doubles as a spending limit to keep one away from the temptation of overspending, the issuers don't need to charge much on fees."
Both should be important to borrowers who are trying to write financial wrongs, Gonzalez adds. "A secure credit card can act as a good method of avoiding overspending, and maybe help you take the first steps towards mastering the art of budgeting," she says.
Some financial experts say that, even with a wider 'open-door' policy at credit card firms, subprime consumers should steer clear of credit card until they have their financial houses in order.
"As a financial professional, I rarely tell someone to get another credit card, especially if they are subprime," says Wrenn. "If I have worked with them for a few months, and see that they are really focused on using credit wisely, I might suggest a new card. But that would be after we have tried to get the interest rate reduced on a card they already have, after they have paid all their bills on time every month for three months, and only if they had a plan to pay down their debt."
But if having a credit card is an itch you just have to scratch, go ahead and scratch away -- it's a great time to do so.