After eroding amid ballooning job losses, the credit profiles of customer rosters at major card lenders have generally recovered, and in some instances become stronger than at the beginning of the recession as issuers cull the ranks of their customers.

The pivot to borrowers with better credit histories appears to have been particularly sharp at Bank of America Corp., which entered the recession with a smaller proportion of high-score customers than some of its peers, and suffered the worst deterioration in loan quality among the nation's six largest issuers.

For most big issuers, the percentage of securitized loans to borrowers with FICO scores below 660 — a range sometimes termed "subprime" — rose from late 2007 to early last year, while the percentage of loans to borrowers with scores above 720 fell (see chart).

Initial jobless claims peaked in March 2009, and customer portfolios reflected an accumulation of missed payments by troubled borrowers that damaged their credit histories. The rebound in credit scores in recent securities filings appeared after issuers implemented aggressive steps to tighten loan standards — including targeting offers of new cards to people with higher credit scores than in the past — and charged off bad accounts in large numbers, purging them from the books.

B of A has outlined a business model overhaul that includes cultivating cardholders who have deposit and other accounts at the company and producing more transaction income relative to borrowing. During a presentation late last year, Brian Moynihan, then B of A's president of consumer and small-business banking and now its chief executive, said, "We were giving [cards] to too many people."

B of A cut unused credit lines by 40% from the end of 2007 to $529 billion at the end of 2009, according to regulatory filings. That was a bigger reduction than at its two biggest card competitors: Citigroup Inc. cut unused lines by 29%, to $785 billion, during that period and JPMorgan Chase & Co. cut them by 20%, to $571 billion. (JPMorgan Chase's unused lines jumped by $51 billion in the third quarter of 2008, when it acquired the banking operations of Washington Mutual Inc. But it has been winding down much of the Wamu credit card operation, which had a 20.5% chargeoff rate in the fourth quarter.)

In tandem, the portion of B of A's securitized credit card loans to borrowers with credit scores above 720 increased 12 points from March 2009 to 44% in December, while the portion of loans to borrowers with credit scores below 660 fell 6 points, to 25%.

Shifts in the representation of credit score categories at large competitors were smaller during roughly the same period. Still, American Express Co., which entered the recession with a high proportion of borrowers with credit scores above 720 at 55%, has climbed further up the credit ladder. Such borrowers accounted for 57% of its securitized receivables in December 2009.


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