Press Release

Consumers Report Diverging Credit Market Experiences and Expectations

July 17, 2017

Given data processing issues, certain data in the following release were edited in August 2018

NEW YORK – The Federal Reserve Bank of New York today released results from its June 2017 Survey of Consumer Expectations (SCE) Credit Access Survey. Regarding consumer experiences, the release shows an increase in application rates for credit over the past 12 months. The share of “discouraged” credit applicants reached a new series low, but a larger share of applications were rejected compared to the previous survey fielded in February 2017.

On the expectations front, the proportion of respondents who reported they are likely to apply for at least one type of credit over the next 12 months decreased to a new series low. The average expected likelihood of applying declined for all credit types, except for credit card limit extensions. However, consumers are slightly more optimistic of future approval rates for credit cards, mortgages and auto loans.

Experiences

  • The share of respondents who were too discouraged to apply for credit over the past 12 months despite needing it, decreased sharply from 8.2% in February to 5.9% in June—the lowest reading since the start of the Credit Access Survey in October 2013. The proportion of respondents who applied for credit and were granted credit over the last 12 months increased from 38.1% in February to 39.9%, while the proportion of respondents who applied for credit and were rejected rose from 8.0% in February to 10.7%.
  • Application rates increased strongly from 46.1% in February to 50.6%, its highest reading since the start of the Credit Access Survey in October 2013. The increase in application rates was broad-based.
  • Rejection rates increased. Both the per applicant rejection rate and the per application rejection rate increased from their February readings of 17.4% and 15.5%, to 21.2% and 16.5%, respectively. The increases in both rates were driven primarily by middle-age respondents, ages 41 to 59.
  • Turning to specific credit types (credit card, credit card limit increase, auto loan, mortgage and mortgage refinance):
    • Application rates increased for all loan types except mortgage refinancing. The application rate for credit cards increased from 25.3% in February to 29.5%. The increase was broad-based but particularly large for middle-age respondents and those with credit scores under 760. Application rates for auto loans and credit card limit increases rose from 14.9% and 8.2% in February to 16.6% and 12.2%, respectively. Mortgage refinance application rates declined from 12.4% in February to 10.5%. The decrease was driven primarily by those ages 60 and older.
    • Rejection rates increased for all credit types, except for auto loans, for which the rejection rate declined from 9.6% in February to 5.0%.
  • Voluntary and involuntary (lender-initiated) account closures increased to 17.3% (highest level since June 2014) and 6.7% (highest level since the start of the Credit Access Survey in October 2013), respectively.

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 slightly from 26.0% in February to 25.5%. This is the lowest reading since the start of the series in October 2013. The latest decrease was driven by respondents ages 40 and younger.
  • The average likelihood of applying for specific kinds of credit over the next 12 months declined for all credit types, except for requested increases in credit card limits, which increased slightly. The largest reduction was in the likelihood of applying for mortgage and auto loans, which fell from 8.8% and 12.2% in February to 7.3% and 10.9%, respectively.
  • The average perceived likelihood of a credit application being rejected, conditional on applying, declined from February 2017 levels for credit cards, mortgages and auto loans, but increased for credit card limit extension and mortgage refinance applications. The average perceived likelihood of a rejection for credit card, a credit card limit increase, mortgage and auto loans all are slightly below their series averages. On the other hand, the perceived chance of a mortgage refinance application being rejected was 29.2%, slightly above its series mean of 28.6%.
  • Perceived financial fragility of U.S. households worsened slightly. The average probability of needing $2,000 for an unexpected expense in the next month increased from 31.4% in February to 32.2%. The average probability of being able to come up with $2,000 if an unexpected need arose within the next month declined from 68.4% in February to 67.1%.

Detailed results are available here.

About the SCE Credit Access Survey

The SCE Credit Access Survey, fielded as part of the SCE (Survey of Consumer Expectations), 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 12 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