Press Release

Credit Cards Defy Slowdown in Broader Credit Demand and Access

November 21, 2022

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 2022, and a press release summarizing trends from the past year is issued annually in November.

The latest Credit Access Survey reveals a decline in consumer credit demand in 2022, with most credit application rates stable or weakening, except for a rise in credit card applications. Current application rates for any type of credit remain below pre-pandemic levels for those with credit scores below 680 but are higher for those with credit scores over 760. Reported rejection rates on credit applications rose slightly overall but declined for new credit card applications. The strength in credit card demand and access coincided with the record growth in credit card balances over the past year.

Looking ahead over the next 12 months, households anticipate they will be less likely to apply for an auto loan, mortgage, or mortgage refinance loan, but report a higher average likelihood of applying for a credit card or credit card limit increase. Consumers expect some easing in credit standards, reporting slightly lower average perceived likelihoods of a future credit application being rejected, conditional on applying over the next 12 months.

Key findings from the survey over the past year include:

Experiences

  • Reported application rates for any kind of credit over the past 12 months declined slightly throughout 2022, after rebounding in 2021 following a large decline in application rates at the beginning of the pandemic. Current rates remain below pre-pandemic levels for those with credit scores below 680 but are higher for those with credit scores over 760. Overall, the average 2022 application rate of 44.8% was slightly below its 2021 level of 45.6% and below its pre-pandemic 2019 level of 45.8%.
  • Reported rejection rates among applicants increased by 0.5 percentage points to 18.0% in 2022 from 17.5% in 2021, just above the 2019 rejection rate of 17.6%.
  • The average share of respondents who were too discouraged to apply for credit over the prior 12 months, despite needing it, continued its gradual decline, falling slightly to 6.5% in 2022 from 6.6% in 2021 and 7.0% in 2020, while remaining just above its 2019 level 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 remained robust during 2022, reaching 27.1% in October 2022, above its October 2021 level of 26.5% and its pre-pandemic reading of 26.3% in February 2020. The average application rate for credit cards for 2022 overall was 26.7%, 3.6 percentage points higher than the average rate for 2021.
      • The application rate for credit card limit increases also remained stable during 2022, at 11.2% in October 2022, compared to 11.3% in October 2021; both were just below the pre-pandemic October 2019 level of 12.0%.
      • The application rate for auto loans in October 2022 was 12.9%, equal to the rate in October 2021, but the average application rate for the year overall declined from 14.6% in 2021 to 13.0% in 2022.
      • Mortgage loan application rates declined from 8.5% in October 2021 to 6.7% in October 2022. The average rate for 2022 overall was 7.2%, 0.8 percentage points below the 2021 average, and 0.7 percentage points below the 2019 average.
      • Application rates for mortgage refinancing plummeted during 2022, falling from 21.4% in October 2021 to 8.9% in October 2022. The latter is comparable to levels that prevailed during the October 2017-2019 period, prior to the recent refinancing boom. 
      Rejection Rates:

      • Reported average rejection rates for auto loan, mortgage loan, and credit card limit extension applications in 2022 exceeded those in 2021, while those for credit card applications declined slightly.
      • The average rejection rate for credit card applications during 2022 declined by 2.4 percentage points to 18.5%.
      • The average rejection rate of mortgage applications increased by 2.2 percentage points to 14.6% in 2022, considerably above the 2019 rate of 10.2%
      • The average rejection rate on auto loans increased by 1.6 percentage points to 5.2% in 2022.
      • The reported rejection rate for credit card limit increases rose slightly to 35.3% in 2022 from 32.3% in 2021.
      • The average rejection rate on mortgage refinance applications remained stable at 9.9% in 2022.
      • Voluntary account closures for any type of credit increased to 15.4% in 2022 from 14.2% during 2021, the same rate as in 2019.

Expectations

  • Responses regarding an unexpected expense suggested a slight increase in the subjective financial fragility of U.S. households. The average probability of needing $2,000 for an unexpected expense in the next month decreased to an average of 32.0% in 2022 from 33.1% in 2021, while the average probability of being able to come up with $2,000 if an unexpected need arose within the next month decreased to 67.5% in 2022 from 68.2% in 2021. Both series have been remarkably flat since 2015, including during the pandemic.
  • The proportion of respondents who report that they are likely to apply for at least one type of credit over the next 12 months decreased slightly, falling to 28.0% in October 2022 (26.7% for 2022 overall) from 28.9% in October 2021 and 29.5% for 2021 overall. The decrease was driven mostly by those with credit scores below 680.
  • The average likelihood of applying for a mortgage decreased to 7.3% from 8.5%. The average likelihood of applying for a mortgage refinance over the next 12 months reached a new series low of 4.9% in October 2022. For the year overall, the average likelihood of applying for a mortgage refinance dropped to 6.1% in 2022 from 11.0% in 2021.
  • The average likelihood of applying for an auto loan declined to 10.9% in October 2022 (11.4% for 2022 overall) from 11.5% in October 2021 (11.5% for 2021 overall).
  • The average likelihood of applying for a credit card or credit card limit increase over the next 12 months instead rose to, respectively, 13.6% and 7.2% in October 2022 (12.6% and 7.3% for 2022 overall) from 12.0% and 6.9% in October 2021 (11.1% and 7.3% for 2022 overall).
  • The average perceived likelihood of a future credit application being rejected, conditional on applying over the next 12 months, was slightly lower in 2022 relative to 2021 for all loan types.

Detailed results are available here.

About the SCE Credit Access Survey

The SCE Credit Access Survey, fielded as part of the 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. 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. See the SCE Credit Access Survey Chart Guide for additional information.

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

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