PRESS RELEASE
Consumers’ Credit Market Experiences and Expectations Deteriorate
November 18, 2016

NEW YORK – The Federal Reserve Bank of New York today released results from its October 2016 Survey of Consumer Expectations (SCE) Credit Access Survey, which provides information on consumers' experiences and expectations regarding credit demand and credit access. The SCE Credit Access Survey results are released every four months.

The release shows a deterioration in consumers’ experiences in the credit market compared to the June release, with a small increase in the proportion of "discouraged" and "rejected" credit applicants. Rejection rates increased, returning to levels last seen in February 2015. The increase in rejection rates was observed for all credit types but was particularly large for applications for credit cards and credit card limit increases, and for mortgage refinancing. The expectations component of the survey also declined relative to the June findings. The proportion of respondents likely to apply for at least one type of credit over the next 12 months decreased again and reached a three-year low. Consumers are also somewhat more pessimistic about future approval rates for credit card and auto loan applications. On the other hand, the perceived likelihood of new mortgage loan and refinancing applications being rejected declined notably.

Experiences

  • The distribution of credit seekers deteriorated compared to the distribution seen in June. The share of respondents who were discouraged from applying over the past 12 months despite needing credit increased slightly from 5.4% in June (the lowest reading since the start of the Credit Access Survey in October 2013) to 5.7%. The proportion of respondents who applied for credit and were granted credit over the past 12 months was 32.4%, its lowest reading since February 2015. Meanwhile, the proportion of respondents who applied for credit and were rejected rose from 8.0% in June to 9.9%.
  • Application rates increased slightly from 41.5% in June to 42.3%. The increase in application rates was driven by respondents aged 60 or older.
  • Rejection rates increased. Both the per applicant rejection rate and the per application rejection rate retreated from their relatively low June leadings of 19.3% and 29.5% respectively, and increased to 23.3% and 39.3%, respectively. Levels this high had not been reported since February 2015. The increases in both rates were broad-based across age and Equifax risk score groups, but most pronounced for younger and low risk score credit-seekers.
    • Turning to specific credit types (credit card, credit card limit increase, auto loan, mortgage, and mortgage refinance):
    • Application rates for credit cards declined from 30.6% in June to 29.1%. The decrease was driven primarily by middle-age (41 to 59 years old) respondents and those with credit scores over 680. Mortgage refinance application rates increased from 10.2% in June to 13.6%, the highest reading since February 2014. The increase was exhibited by all groups except those 40 and younger. Application rates for other credit types (auto mortgage, and credit limit increases) were within a percentage point of their June levels.
    • Rejection rates reported this October increased for all credit types relative to their June levels, especially so for credit cards and for higher credit card limit and mortgage refinancing requests. The rejection rate for these applications rose respectively from 15.0% in June to 18.6%, 16.0% to 31.3%, and from 17.3% to 23.6%. Rejection rates for these loan types have not been this high since February 2015. Rejection rates for mortgages also rose from 10.1% to 13.6%.
    • Voluntary and involuntary (lender-initiated) account closures decreased slightly.

    Expectations

    • The proportion of respondents who report they are likely to apply for at least one type of credit over the next 12 months decreased from 29.8% in February of this year and 28.4% in June, to 27.8% this October. This is the lowest reading since the start of the series in October 2013. The latest decrease was driven by respondents 60 years and younger, and those with credit scores above 680.
    • The average likelihood of applying for specific kinds of credit over the next 12 months remained essentially unchanged from June.
    • The average perceived likelihood of a credit application being rejected, conditional on applying, rose from June for all credit types except mortgage loans and mortgage refinance applications. The average likelihood of a rejection for credit card and credit limit increase requests rose respectively from 27.9% in June to 29.0%, and 35.6% in June to 38.2%. On the other hand, the perceived chance of a mortgage loan or mortgage refinance being rejected fell from 39.9% in June to 34.2% and from 26.7% in June to 21.4% respectively, both reaching new lows in our series which started in October 2013.

    Detailed results are available here under the "Downloads" tab on the SCE Credit Access Survey webpage

    About the SCE Credit Access Survey

    The SCE Credit Access Survey, fielded as part of the broader Survey of Consumer Expectations (SCE), provides information on consumers' experiences and expectations regarding credit demand and credit access. Every four months, SCE panelists are asked whether they applied for credit in the past 12 months, and the resulting outcomes. They are also asked about their expectations of applying for credit over the next twelve months, and the perceived likelihood of those applications being accepted. We collect this information for five specific credit products: auto loans, credit cards, credit card limit increases, mortgages, and mortgage refinancing. Survey findings (in instances with sufficient sample sizes) are also presented separately by age and self-reported credit score subgroups.

    More information about the SCE survey goals, design, and content can be found here.

    Contact
    Betsy Bourassa  
    (212) 720-6885
    betsy.bourassa@ny.frb.org