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Consumers’ Credit Market Experiences and Expectations Deteriorate

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The Federal Reserve Bank of New York today released results from its October 2016 Survey of Consumer Expectations (SCE) Credit Access Survey, which provides information on consumers’ experiences and expectations regarding credit demand and credit access. The SCE Credit Access Survey results are released every four months.

The release shows a deterioration in consumers’ experiences in the credit market compared to the June release, with a small increase in the proportion of “discouraged” and “rejected” credit applicants. Rejection rates increased, returning to levels last seen in February 2015. The increase in rejection rates was observed for all credit types but was particularly large for applications for credit cards and credit card limit increases, and for mortgage refinancing. The expectations component of the survey also declined relative to the June findings. The proportion of respondents likely to apply for at least one type of credit over the next 12 months decreased again and reached a three-year low. Consumers are also somewhat more pessimistic about future approval rates for credit card and auto loan applications. On the other hand, the perceived likelihood of new mortgage loan and refinancing applications being rejected declined notably.

Experiences

The distribution of credit seekers deteriorated compared to the distribution seen in June. The share of respondents who were discouraged from applying over the past 12 months despite needing credit increased slightly from 5.4% in June (the lowest reading since the start of the Credit Access Survey in October 2013) to 5.7%. The proportion of respondents who applied for credit and were granted credit over the past 12 months was 32.4%, its lowest reading since February 2015. Meanwhile, the proportion of respondents who applied for credit and were rejected rose from 8.0% in June to 9.9%.

Application rates increased slightly from 41.5% in June to 42.3%. The increase in application rates was driven by respondents aged 60 or older.

Rejection rates increased. Both the per applicant rejection rate and the per application rejection rate retreated from their relatively low June leadings of 19.3% and 29.5% respectively, and increased to 23.3% and 39.3%, respectively. Levels this high had not been reported since February 2015. The increases in both rates were broad-based across age and Equifax risk score groups, but most pronounced for younger and low risk score credit-seekers.

Turning to specific credit types (credit card, credit card limit increase, auto loan, mortgage, and mortgage refinance):