U.S. consumers sought more credit-card borrowing in the third quarter, but banks reported stricter lending standards for applicants with weaker credit. The findings came from the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey, which gathered responses from 61 domestic banks.
The survey, published on Monday, found that banks saw stronger demand for credit-card loans while reducing exceptions for applicants who did not meet their internal credit-scoring thresholds. Banks also said they tightened credit limits on existing credit-card accounts and on new accounts.
“Tightening the extent to which loans are granted to borrowers not meeting credit scoring thresholds for credit card loans and other consumer loans,” the Federal Reserve said.
Demand reached a four-year high
A Reuters analysis of the survey described the increase in consumer demand for credit-card borrowing as the strongest in four years. The Federal Reserve said banks most often attributed the higher demand over the past year to changes in customers’ spending needs in response to price changes for goods and services.
The combination of stronger demand and more selective lending could affect consumers who rely on credit cards for purchases or unexpected expenses. Applicants below a bank’s preferred credit range may face fewer approvals, lower limits or both, based on the lending conditions reported by the banks.
| Survey finding | What banks reported |
|---|---|
| Credit-card demand | Stronger demand in the third quarter |
| Applicants below scoring thresholds | Tighter approval standards |
| Credit limits | Tighter limits on credit-card accounts |
| Reported reason for demand | Changing spending needs linked to price changes |
Strong-credit applicants saw better approval odds
The survey showed that banks were more likely over the past year to approve credit-card applications from borrowers with strong credit. Approval likelihood for “near-prime” borrowers, a term used for applicants between the strongest and weakest credit categories, remained “basically unchanged,” according to the survey findings.
That distinction means the tightening was not reported evenly across all applicants. Banks indicated greater willingness to approve applications from consumers with strong credit, while the outlook for near-prime applicants was largely stable and exceptions for applicants below scoring thresholds became less common.
Delinquencies at Synchrony remained below last year
Synchrony, a lender widely used in the home-services industry, reported that its 30-day and 90-day delinquency rates increased from the second quarter. A delinquency rate measures the share of loan balances that are at least 30 or 90 days past due. The company said both measures remained below their levels from a year earlier.
Synchrony’s latest earnings presentation assumed no additional broad-based tightening in its approval decisions or in the amount of credit it extends for the full year. The company’s outlook is separate from the Federal Reserve survey, which reflects responses from the 61 participating domestic banks.
- Demand: Banks reported the strongest increase in credit-card borrowing demand in four years, according to a Reuters analysis.
- Access: Banks said they were making fewer exceptions for applicants below their credit-scoring thresholds.
- Limits: Banks also reported tightening credit limits on credit-card accounts.
