Fed: Access to credit cards increasing

Fewer applicants rejected for new cards, but issuers stingy with credit limit increases

Fed: Access to credit cards stabilizes
Fed: Access to credit cards stabilizes

Banks are smiling on applications for credit cards, a new federal survey said Wednesday.

The odds of being rejected for a credit card application are holding steady at a relatively low level, according to the Federal Reserve Bank of New York survey. That result comes after the rejection rate dropped sharply earlier this year.

The economy's health gets at least some of the credit. "The fact that more people are getting access to credit is reflecting the fact that the economy continues to improve and the job picture continues to brighten," said James Chessen, chief economist at the American Bankers Association. "There's always more access to credit when the risk of providing that credit goes down."

Of people who had applied for a credit card in the past 12 months, 13.5 percent said they were rejected, according to the New York Fed's Credit Access Survey, which was conducted in October. That was the same fraction who were turned away in the previous edition of the survey, conducted in June. In that earlier survey, the rejection rate fell from 20 percent, a level that had been about the norm since the survey started in 2013. The continued low rate of rejection confirms that access to credit cards, clamped down to a trickle during the recession, has increased.

Looking more broadly at all types of credit, including mortgages and auto loans as well as cards, 20 percent of credit applicants experienced a rejection, up from 19 percent.

The survey is the second report this week to signal that access to credit has gotten easier for card seekers. A Nov. 16 report from the credit bureau TransUnion said the number of people with cards is increasing, and many of the new cards are going to people with less-than-perfect credit records.

The rate of people applying for credit cards also held roughly steady in October, the New York Fed survey said, with 27 percent of respondents saying they'd applied for a card in the past 12 months, compared to 29 percent in the June survey.

The makeup of applicants in the Fed's survey shifted, however. More people in the middle credit tier, with scores between 680 and 760, filled out card applications. Fewer applicants came forward with scores below 680 or over 760.

When it came to getting higher credit limits, credit seekers ran into stiffer resistance than with cards. Of people who sought a higher limit in the past 12 months, 24 percent reported being shot down, up from 17 percent in the June survey.

The higher rejections came as more people sought a credit limit increase, with requests rising to 15 percent of respondents, from 13 percent.

Looking at mortgages and auto loans as well as cards, consumers' access to credit was about stable from June to October, the New York Fed said in a statement. The share of people reporting they were discouraged from applying increased since June, however, rising to 23 percent, from 17 percent. "This increase was mainly driven by lower credit score and younger respondents," the statement said. Almost all the discouraged applicants had credit scores below 680.

The slice of consumers saying an account had been closed by the lender shrank to 2.5 percent, from 3.8 percent in the June survey. About 12 percent said they had closed an account voluntarily during the past year, compared to 13 percent in June.

See related: Fed: Card balances rise for 7th straight month

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Updated: 03-25-2019