Consumer’s Credit Access Experiences and Expectations Decline

bigstock-male-hand-showing-credit-card-19469411The Federal Reserve Bank of New York released results from its October 2016 Survey of Consumer Expectations (SCE) Credit Access Survey, and the news is not good.

The Credit Access Survey is a component of the SCE that measures consumers’ expectations and experiences concerning access to credit, such as:

  • The likelihood of applying for a credit card over the next 12 months;
  • The likelihood of rejection of a credit application;
  • The likelihood of rejection of a credit limit increase;
  • The likelihood of rejection of a mortgage or mortgage refinance.

The results of this part of the survey are released every four months. This October 2016 release showed what the Fed termed a “deterioration” in consumers’ experience in the credit market since June, with rejection rates returning to levels last seen in February 2015. Not surprisingly, the percentage of respondents likely to apply for credit over the next 12 months declined to 27.8%, the lowest number since the survey began in October 2013.

Another component of the Credit Access Survey consists of a question that has been asked of respondents since December 2013: “What do you think is the percent chance that you could come up with $2,000 if an unexpected need arose within the next month?” Researchers from the Fed say: “The question is similar to one used to assess the financial fragility of households in the United States and in other countries. The average response to this question in our December 2013 survey was 57.3 percent, and had risen to 65.9 percent in October 2016.”

They are quick to note, however, that the number masks a disparity between higher-income households and lower-income households. Of households with an annual income over $100,000, 85.5% could come up with $2,000, as compared with 47.7% of lower-income households (those with an annual income less than $50,000.)

For complete details on the Credit Access Survey, check the Fed’s website.

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