Loan rejection rates are climbing — especially for people under a 680 credit score
A rising number of consumers say lenders are rejecting their loan applications now. Furthermore, record-breaking shares of people expect lenders to keep saying no on mortgage applications, car loans and bids for credit card increases well into 2024.A rising number of consumers say lenders are rejecting their loan applications now. Furthermore, record-breaking shares of people expect lenders to keep saying no on mortgage applications, car loans and bids for credit card increases well into 2024.
The denial rates are rising across the board for car loans, new credit cards, credit card increases, mortgages and mortgage refinances. The lower the credit score, the louder the “no.” Since around early 2022, more people have been turning to credit counselors for help after loan rejections, said Barry Coleman, vice president of program management and education at the National Foundation for Credit Counseling.
The New York Fed’s latest release includes the aftermath of Silicon Valley Bank and Signature Bank’s early March closures. At the time, experts expected lenders to become more sparing with consumer credit. Loan officers already said they were tamping down on consumer credit, and the trend intensified after the bank turmoil.
The rising loan rejection rate “could be a reaction to the bank problems that we had back in March. But it also could be a reflection of the expectation that the economic backdrop. … could begin to weaken, despite the fact the labor market remains strong,” Krosby said.
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