Discouraged Credit-Seekers At Record Low

New Survey Shows Divergence in Credit Experience and Expectations

Discouraged Credit-Seekers At Record Low
August 9, 2017

Have you been frustrated over the last few years with an inability to get credit? A recent survey by the Federal Reserve of New York suggests that while credit may be loosening, your frustration may continue.

Three times a year since October 2013, the New York Fed's SCE Credit Access Survey assesses the state of credit from the consumer perspective – chronicling consumer experiences in applying for credit, and how those experiences match up with expectations. The June 2017 survey shows greater optimism in applying for credit, but a lower rate of success in receiving that credit. Expectations are relatively high, but perhaps they are higher than they should be.

On the positive side, the share of survey respondents who needed credit, but were too discouraged to apply for it, fell to 5.1% — the lowest number since the survey began. That represents a two-percentage-point drop from the previous survey, presumably indicating optimism that credit is loosening (although it could also reflect an increase in the need for credit within that population).

Application rates for credit hit a record level as well, rising from 39.9% in February to 43.6% in the June survey. The survey found a reasonably broad increase across the population, but application rates were higher among respondents aged forty and below – indicating that millennials who were hit hard by the recession may be softening a general aversion to credit and debt.

The potential downside of a large increase in credit applications is a corresponding increase in rejected applications, and the June survey confirmed that outcome. While the number of respondents who successfully applied for credit in the last twelve months rose from 31.5% to 32.8%, the percentage of rejected applicants increased from 8.5% to 10.8%.



Rejection rates increased on both a per applicant and a per application basis, with respondents aged 40-59 driving both rejection rate increases. This suggests that a significant pool of overextended middle-aged Americans still have work to do to repair their financial situation.

It seems likely that the rejection rates will dampen enthusiasm a bit, and the survey results reflect that likely shift. The share of respondents expecting to apply for at least one form of credit within the next twelve months dropped from 26% to 25.5% – yet another record number in the short history of the survey. The decrease was most prevalent among those aged 40 and younger, suggesting that a significant number of those respondents have already successfully required the credit they needed – or were rejected and are likely to retreat back into the discouraged category.

The New York Fed survey paints a picture of a continuing recovery that has not yet reached all Americans. Credit is beginning to loosen and more Americans are willing to re-enter the credit market – but too many Americans remain unprepared to do so. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.

Regardless of the overall market situation, you can increase your chances of a successful credit application by following simple, common sense rules – such as setting a reasonable budget and sticking to it, paying all of your bills on time, using only a relatively small portion of your credit at any time, and keeping your credit balances low and under control.

Follow these rules, and perhaps you can extend your positive experiences to the next New York Fed survey. You can take advantage of your credit opportunities and receive an approval – maybe even with a favorable interest rate because of your stellar financial practices.

If you want more credit, check out MoneyTips' list of credit card offers.


Photo ©iStockphoto.com/filmfoto

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