Press Release

Credit Access Survey Shows Plunge in Credit Demand and Access

December 21, 2020

NEW YORK – The Federal Reserve Bank of New York’s Center for Microeconomic Data today released results from its latest Survey of Consumer Expectations (SCE) Credit Access Survey, which provides information on consumers’ experiences with, and expectations about, credit demand and credit access. The survey is fielded every four months, most recently in October 2020, and a press release summarizing trends from the past year is issued annually.

The latest Credit Access Survey reveals the stark imprint of the pandemic on consumer credit markets, with most credit application and acceptance rates falling sharply after February 2020. Application and acceptance rates for credit card and credit limit increase requests showed the largest declines, followed by auto loans. Meanwhile, application and acceptance rates for mortgage refinances continued to surge through 2020, with primarily high credit score borrowers taking advantage of lower mortgage rates. Looking ahead, households generally lowered their expectations during 2020 regarding applying and receiving credit over the coming year. The average probability of being able to come up with $2,000 for an unexpected need also reached a new series low in October 2020.

More specific findings from the Survey over the past year include:

Experiences

  • Reported application rates for any kind of credit over the past 12 months dropped 11 percentage points (or 24%) over the course of 2020, slipping from 45.6% in February to 34.6% in October, a new series low. The decline was broad-based across credit score and age groups, but largest for those with credit scores below 760 and those aged 60 or older. Overall, the average 2020 application rate of 39.8% was well below the 2019 average of 45.8%.
  • Reported rejection rates among applicants increased by 3.8 percentage points (or 27%) during 2020 from 14.2% in February to 18.0% in October. The increase was largest for respondents with scores under 680, consistent with a general tightening of lending standards since February. Overall, the average 2020 rejection rate of 15.7% was moderately below its 2019 level of 17.6%. These findings, as reported by households, are consistent with the July and October 2020 results of the Federal Reserve Board’s Loan Officer Opinion Survey on Bank Lending Practices, revealing a tightening of lending standards on consumer loans.
  • The share of respondents who were too discouraged to apply for credit over the past 12 months (despite needing it) increased slightly, rising from 6.9% in February to 7.2% in October. The 2020 average of 7.0% was slightly above the 2019 average of 6.4%.
  • Considering applications and rejections experienced by respondents in the 12 months preceding each survey for specific credit types (credit cards, credit card limit increases, auto loans, mortgages, and mortgage refinancing), we find:
      • Application Rates

        • The application rate for credit cards fell by 10.6 percentage points (or 40%) since February 2020 to 15.7%, a new series low. The decline was broad-based across age and credit score groups.
        • The application rate for credit card limit increases dropped by 6.6 percentage points (or 48%) since February to 7.1% in October, the lowest level since the start of the series in October 2013. The decline was broad-based across age and credit score groups.
        • Application rates for auto loans declined by 3.2 percentage points (or 22%) since February to 11.6% in October, a new series low. The decline was largest for those with credit scores above 760 and those aged 60 or older.
        • Continuing a rise observed in October 2019, application rates for mortgage refinancing increased through the year, moving from 10.8% in February to 15.5% in June and 16.4% in October, its highest level since October 2013. The 5.6 percentage point (or 51%) increase in the overall rate between February and October was driven by those with high credit scores (above 760). 
        • In contrast to application rates for mortgage refinancing, mortgage loan application rates declined from 6.7% in February to 5.5% in October. The decline was driven by respondents with a credit score below 760.
      • Rejection Rates

        • Reported rejection rates for credit card, auto loan and credit limit increase applications all rose since February, while those for mortgage refinance applications instead declined sharply.
        • The rejection rate for credit card applications increased by 11.6 percentage points (or 119%) since February to reach 21.3% in October, the highest level for the series since June 2018.
        • The rejection rate on auto loans increased by 0.9 percentage point since February to hit 8.6% in October, its highest level since February 2017.
        • The reported rejection rate for credit card limit increases rose by 11.7 percentage points (or 46%) to reach 37.1% in October 2020.
        • The rejection rate on mortgage refinance applications dropped sharply, falling from 15.8% in February to 5.8% in October, a new series low.
        • Voluntary and involuntary (lender-initiated) account closures for any type of credit both decreased slightly between February 2020 and October 2020. Overall, the average voluntary account closure rate for 2020 was 1.3 percentage points higher than the 2019 figure, while the rate for involuntary account closures was 0.6 percentage point lower.

 Expectations

  • The Survey provides mixed evidence on the subjective financial fragility of U.S. households. While the average probability of needing $2,000 for an unexpected expense in the next month decreased from an average of 33.6% in 2019 to 31.8% in 2020, the average probability of being able to come up with $2,000 if an unexpected need arose within the next month decreased from 69.8% in 2019 to 69.4% in 2020. Since February 2020, the latter measure has dropped sharply, reaching a new series low of 65.6% in October 2020.
  • The proportion of respondents who report that they are likely to apply for at least one type of credit over the next 12 months increased slightly, rising from 24.9% in October 2019 to 26.1% in October 2020. The increase was driven by those with credit scores below 760.
  • The average likelihood of applying for a credit card or credit card limit increase over the next 12 months declined sharply since February 2020, falling by 36% and 34%, respectively. The decline was driven by respondents with credit scores above 680. The average likelihood of applying for a mortgage also dropped sharply (by 39%), a decrease driven by those with credit scores under 760. The average likelihood of applying for an auto loan declined only slightly, slipping from 10.8% in February 2020 to 10.0% in October 2020, while the average likelihood of applying for a mortgage refinance over the next 12 months increased from 10.7% in February to 11.5% in October 2020.
  • The average perceived likelihood of a credit application being rejected, conditional on applying over the next 12 months, has increased since February for credit cards (by 46%) and credit card limit increases (by 27%), with marginal increases for auto loans and mortgage refinancing. Meanwhile, the average perceived likelihood of a future mortgage application being rejected declined slightly.
  • Though the expected rejection rate for credit cards rose to a series high in 2020, expected rejection rates for other types of credit applications are not unusually high by historical standards.

Detailed results are available here.

About the SCE Credit Access Survey

The SCE Credit Access Survey, fielded as part of the 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 12 months and the perceived likelihood of those applications being accepted. This information is collected 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. A press release summarizing trends from the past year is issued annually.

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

Contact
Mariah Measey
(347) 978 3071
Mariah.Measey@ny.frb.org 

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