While the economy's fledgling recovery is reviving America's love affair with debt, many credit card companies remain surprisingly cautious in courting customers.
"Back during the boom years, pretty much every inch of the credit spectrum was being covered," said Ben Woolsey, director of marketing and consumer research at Creditcards.com, in an interview with The Huffington Post. "Subprime issuers [who focus on people with low credit scores] were expanding up to better quality, and super prime issuers [who focus on people with high credit scores] were expanding down to get more people."
Today, however, Woolsey sees a dead zone in the credit card market for customers who have neither really good nor really bad credit but rather hover somewhere between the two extremes.
"The no man's land is for people with fair credit," said Woolsey.
While credit card companies have resumed aggressively targeting customers with especially good credit scores, and even jumped back into the market for customers with bad credit scores, they are reluctant to reenter the fair credit market because they lost money on these customers during the recession, explained Odysseas Papadimitriou, CEO of Cardhub.com.
"With fair credit, some people won't pay you and some will pay you, so there's much more uncertainty," said Papadimitriou in an interview with HuffPost. "When the economy was doing well, these customers did well, so issuers felt more comfortable with them. But when the economy turned, suddenly there was much more volatility in how they performed, and a lot of issuers got burned and left that part of the market."
Once bitten twice shy, credit cards companies now prefer to stay in their wheelhouses, with the big banks focused primarily on the consumers with excellent credit, and the small, niche issuers focused on the consumers with bad credit, explained Papadimitriou.
While there are some issuers serving the fair credit market, there aren't very many, and the lack of competition leaves consumers short on options.
That lack of competition is compounded by the various bank acquisitions that have occurred in recent years. Credit card companies previously active in the fair credit market are now retreating, according to Papadimitriou who uses Chase's 2008 acquisition of Washington Mutual as an example.
"Chase, who bought Washington Mutual, doesn't seem to be interested in going into the fair credit space where Washington Mutual was a strong player in it," he explained.
While Woolsey and Papadimitriou agree that the credit market for fair customers has contracted, they differ on the definitions of "fair credit." For Woolsey, the segment includes borrowers with a FICO score between 620 and 659, while Papadimitriou defines the market more broadly as a FICO from 620 and 720.
A FICO score is a figure calculated by the Fair Isaac Corporation to determine a consumer's credit-worthiness. While the median FICO score is 710, nearly 22 percent of Americans score between 600 and 699, according to the Fair Isaac Corporation.
To learn more about your credit score, check out this guide from the Federal Trade Commission on how to safely get your credit history. It is important to note that there are numerous fraudulent credit score websites, so learn the difference between legitimate and fake sites before providing any personal information.
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