The sub-prime credit market: Identifying good risks for unsecured cards

Unsecured credit cards are a late, and somewhat reluctant, arrival to the sub-prime credit market. Unlike mortgages and auto loans, which are collateralized by some real property, credit cards are equivalent to a personal line of unsecured credit. While credit card issuers have good reason to be prudent when entering the sub-prime market, they have a tremendous amount to gain by identifying creditworthy, but credit-deprived individuals. Neuristics Corp. built a sub-prime credit risk model using the criteria of sensitivity, credit card orientation and common information. The model found that among specific groups, certain types of bad loan payment histories were virtually irrelevant to credit card payment habits.