Are credit standards loosening for subprime borrowers?

The economy is continually improving, and with it go consumers' personal financial situations and by extension nationwide credit conditions. Now experts say that subprime Americans are in a better position to borrow than they have been in years.

A study by the credit monitoring bureau Equifax recently found that lines of credit extended to consumers with subprime credit scores rose 41 percent last year, and hit a high in December not seen in four years, according to a report from MarketWatch. And that trend extended into this year, as credit card lending to consumers with low ratings rose 21 percent on an annual basis in the first quarter. Experian, another credit monitoring firm, found that this was the largest year-over-year increase seen since 2008.

As credit for subprime borrowers has continued to expand, so too have the value of those offers, the report said. Experian observed that the amount of credit extended to subprime borrowers is once again rising after falling every year since 2008, rising to an average of about $1,500. In all, about 24 percent of new credit cards were issued to subprime borrowers last year, up from less than 22 percent the year prior. Last year's rate has largely held for issuing so far this year as well.

"Someone who has a credit score of 700 has had a pretty good shift in how likely they are to default," Sarah Davies, senior vice president of analytics and product management at VantageScore Solutions, told the site. "The world has gotten better and risk has calmed down."

Less risk means more lending
Improving credit conditions have generally led to far lower chances that a consumer will default on their credit card accounts, the report said. Prior to the recession, in 2005, that risk was about 1 percent, but rose to roughly 7 percent in 2009. Now, it's back down closer to 3 percent. Further, competition for new borrowers has spurred much of the extension of new lines of credit.

Before applying for any kind of credit, it's important for consumers to know where they stand, which means they should take the time to order copies of their credit reports. This will help them identify any potentially unfair markings that may be dragging down their scores unduly.