Fed Survey: Consumers’ Optimism about Access to Credit is on the Rise

Credit application rejections decline while some consumers limit application rates for specific credit types, including credit cards.

11/29/2017 11:00 AM

Fed Survey: Consumers’ Optimism about Access to Credit is on the Rise

Consumers are more optimistic about access to credit, according to a quarterly survey from the Federal Reserve Bank of New York.

The October 2017 Survey of Consumer Expectations Credit Access Survey shows, “consumers’ recent experiences were positive, with declines in both rejection rates for credit applications over the past 12 months and in the share of ‘discouraged’ credit applicants,” according to a news release from the Fed.

For example, the number of respondents over the past 12 months who were too discouraged to seek credit—despite a need for it—declined to a series low of 4.9 percent in October.

At the same time, the share of respondents who applied for and received credit over the last 12 months increased from 32.8 percent in June to 34 percent in October, according to the Fed. The amount of respondents who were rejected on their credit application declined from 10.8 percent in June to 8 percent in October.

However, application rates for specific credit types, except mortgages, did decline slightly in October.

Credit card application rates declined from 29.5 percent in June to 28.2 percent in October. The application rates also declined for auto loans, credit card limit increases and mortgage refinancing.

“Regarding consumers’ expectations about the future, the proportion of respondents who reported they are likely to apply for credit over the next 12 months was essentially unchanged,” the Fed reports. “Compared to the past few years, consumers showed greater optimism about the likelihood of future credit applications being accepted. Consumers’ financial fragility improved, continuing a slow overall upward trend seen since June 2016.”

The Fed also recently released its Survey of Consumer Expectations reflecting trends in household finance, including spending and debt payments.

Key findings include:

  • Expectations for credit availability in the year ahead improved in October.
  • The average perceived probability of missing a minimum debt payment over the next three months declined from 13.4 percent in September to 12.8 percent in October.
  • Consumers’ expectations for their household financial situation in the year ahead improved slightly in October with 40.9 percent of respondents reporting they expect to be better off financially compared to 40.3 percent in September and 34.7 percent one year ago.
  • The median household spending expectations increased slightly to 2.8 percent in October, but remain below the 12-month average of 3.1 percent.

The Survey of Consumer Expectations is based on consumers’ expectations for overall inflation and how they expect prices for food, gas, housing and education to behave. It also shows consumers’ views on job prospects, earnings growth, and their expectations about future spending and access to credit.

The full survey results are available on the Fed’s website.

How do you factor in consumers’ credit activity to your daily processes and interaction with consumers? Is it reflective in trends seen on the collection floor? Let us know your experiences by emailing the communications department at comm@acainternational.org.

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