Credit card issuers attract risky customers as standards soften

Periods of economic growth typically lead lenders to relax their credit card distribution requirements, and that is exactly what is happening during the current economic recovery.

About 11.6 million at-risk borrowers – those with a credit score of less than 620 – obtained general-purpose credit cards in the first nine months of 2021, according to Equifax, a credit reporting agency. . cited by the Wall Street Journal. This is a record for the period and up 43.5% compared to 2020.

About 29.2 million people with credit scores of 660 and below received general purpose credit cards last year, according to projections from TransUnion, another credit reporting agency cited in The Journal.

This is an increase from 20.4 million in 2020 and 26.3 million in 2019. The score level of 660 is widely recognized as the line between good and good credit scores.

But that trend hasn’t done much for the stock prices of Visa V and Mastercard MA, America’s two largest card issuers. Visa shares have fallen 1% in the past year, and Mastercard has gained just 4%, while the S&P 500 index has climbed 22%. Valuation issues and intense competition choked stocks.

Still, Morningstar analyst Brett Horn likes both companies, attributing them wide gaps.

“Visa is a somewhat unique company in that it is a long established market leader that still enjoys strong growth prospects,” he wrote in a comment last month.

“Mastercard’s position in today’s global electronic payment infrastructure is essentially unassailable,” Horn wrote in November.

He assesses Visa’s fair value at $ 221, compared to its recent listing of $ 211.10. And he estimates Mastercard’s fair value at $ 352, against its recent quote of $ 363.72.

About Shirley L. Kreger

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