By Alex Tanzi | Bloomberg
A recent survey conducted by the Federal Reserve reveals a concerning trend for Americans seeking credit. Due to high interest rates and cautious lending practices, individuals are facing an increased likelihood of loan rejections. In fact, the rejection rate for loan applicants has reached its highest level in the past five years, sitting at 21.8% for the 12-month period ending in June. Additionally, overall credit applications have dropped to their lowest point since October 2020.
The previous survey, conducted in February prior to the collapse of Silicon Valley Bank and other US lenders, reported a rejection rate of 17.3%. However, the current survey shows a broad-based increase in rejections across all age groups, with those with credit scores below 680 experiencing the highest rejection rates.
In a significant shift, the rejection rate for auto loans has now exceeded the application rate for the first time since the survey’s inception in 2013. The rejection rate for auto loans has climbed to 14.2% from the previous 9.1%. Additionally, a record-high one-third of auto loan applicants expected their applications to be rejected. Furthermore, there has been a notable rise in expectations of loan rejections for new mortgages, mortgage refinancing, and increases in credit card limits.
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