Survey reveals drop in borrower-initiated and rise in lender-initiated credit account closures
Source: Federal Reserve Bank of New York
NEW YORK – The Federal Reserve Bank of New York’s Center for Microeconomic Data today released results from its latest Survey of Consumer Expectations (SCE) Credit Access Survey, which provides information on consumers’ experiences with, and expectations about, credit demand and credit access. The survey is fielded every four months, most recently in October 2024, and a press release summarizing trends from the past year is issued annually.
The latest SCE Credit Access Survey reveals largely stable credit demand but increased rejection rates on credit applications in 2024. Reported rejection rates for credit cards, mortgages, auto loans, credit card limit extension applications, and mortgage loan refinance applications all rose in 2024, with those for auto loans and mortgage refinances reaching new series highs since the module was first fielded in 2013. The proportion of respondents reporting voluntary credit account closures dropped to a new series low, while the share experiencing lender-initiated account closures rose to a new series high.
Looking ahead, households anticipate that they will be less likely to apply for at least one type of credit over the next 12 months. They report lower average likelihoods of applying for a new credit card or a mortgage, but higher likelihoods of applying for a mortgage refinance loan. Consumers also report higher average perceived likelihoods of a future credit application being rejected, conditional on applying over the next 12 months, for credit card, auto loan, and mortgage refinance applications, but lower expected rejection rates for mortgage applications and credit limit increase requests.
Finally, there was a slight decrease in 2024 in the subjective financial fragility of U.S. households. The average reported probability of being able to come up with $2,000 if an unexpected need arose within the next month increased slightly.
Key findings from the survey over the past year include:
Experiences
- Reported application rates for any kind of credit over the past 12 months were largely stable, following declines in 2022 and 2023. Overall, the average 2024 application rate of 42.1% was slightly above its 2023 level of 41.2%, and below its pre-pandemic 2019 level of 8%. Current rates are particularly below pre-pandemic levels for those below age 60.
- Reported rejection rates among applicants increased by 0.9 percentage point to 21.0% in 2024, from 20.1% in 2023 and 18.0% in 2022, remaining well above the 2019 level of 17.6%. Rejection rates exceed pre-pandemic levels especially for those with credit scores under 680.
- The average share of respondents who were too discouraged to apply for credit over the past 12 months, despite needing it, because they expected their applications to be rejected, increased slightly to a 2024 rate of 6.0% from an overall 2023 rate of 5.2%, which is slightly below the 2019 level of 6.4%. The increase follows a gradual decline in the rate since 2020.
- Considering applications and rejections experienced by respondents in the 12 months preceding each survey for specific credit types (credit cards, credit card limit increases, auto loans, mortgages, and mortgage refinancing), the survey found:
- Application Rates:
- The application rate for credit cards remained robust during 2024, reaching 28.6% in October 2024, slightly below its October 2023 level of 29.0%, and remaining above its pre-pandemic reading of 27.2% in October 2019. The average application rate for credit cards for 2024 overall was 27.8%, 1.8 percentage points above the 2023 overall rate.
- The application rate for credit card limit increases ticked down 0.1 percentage point to 14.3% for 2024 overall, remaining well above the 2019 rate of 12.7%.
- The application rate for auto loans in October 2024 was 11.8%, below the rates in October 2023 of 13.5% and October 2022 of 12.9%. The average application rate for the year overall declined to 11.2% in 2024, from 12.7% in 2023 and 13.0% in 2022.
- Mortgage loan application rates increased to 6.0% in October 2024 from 4.3% in October 2023. The average rate for 2024 overall was 6.1%, 0.4 percentage point above the 2023 average, but 1.8 percentage points below the 2019 average.
- Application rates for mortgage refinancing declined further during 2024, falling to 2.4% in 2024 from 4.5% in 2023, a new series low.
- Rejection Rates:
- Reported average rejection rates for credit cards, mortgages, auto loans, credit card limit extension requests, and mortgage loan refinance applications all rose in 2024 and are all well above 2019 levels.
- The average rejection rate for credit card applications during 2024 increased by 0.5 percentage point to 20.2%.
- The average rejection rate for mortgage applications increased by 8.6 percentage points to 20.7% in 2024, remaining well above the 2019 rate of 10.2%.
- The average rejection rate for auto loans increased by 0.4 percentage point to 11.4% in 2024, the measure’s highest rate since the start of our series in 2013.
- The reported rejection rate for credit card limit increases rose to 38.9% in 2024 from 30.9% in 2023.
- The average rejection rate for mortgage refinance applications increased to a new series high of 25.6% in 2024 from 15.5% in 2023.
- Voluntary account closures for any type of credit decreased from 15.8% in 2023 to 13.9% in 2024, a new series low. The proportion of respondents experiencing lender-initiated account closures for any type of credit increased to 7.4% in 2024 from 7.2% in 2023, a new series high.
- Application Rates:
Expectations
- Responses regarding the ability to pay for an unexpected expense suggest a slight decrease in the subjective financial fragility of U.S. households. The average probability of being able to come up with $2,000 if an unexpected need arose within the next month increased to 66.5% in 2024 from 65.8% in 2023. On the other hand, the average probability of needing $2,000 for an unexpected expense in the next month increased to 36.7% in 2024 from an average of 33.4% in 2023.
- The proportion of respondents who reported that they are likely to apply for at least one type of credit over the next 12 months decreased to 24.1% in October 2024 (23.1% for 2024 overall) from 25.1% in October 2023 (25.9% for 2023 overall). The decrease was driven mostly by respondents with credit scores between 680 and 760.
- The average likelihood of applying for a mortgage decreased further to 6.4% in 2024 from 6.7% in 2023. The average likelihood of applying for a mortgage refinance over the next 12 months rebounded from a series low of 3.5% in October 2023 to 6.1% in October 2024. For the year overall, the average likelihood of applying for a mortgage refinance increased to 5.9% in 2024 from 4.7% in 2023.
- The average likelihood of applying for an auto loan increased marginally to 10.7% in October 2024 from 10.2% in October 2023. The average likelihood of applying for an auto loan for 2024 overall was 9.9%, somewhat below the 11.3% rate for 2023.
- The average likelihood of applying for a credit card over the next 12 months declined slightly to 12.5% in October 2024 (12.1% for 2024 overall) from 12.7% in October 2023 (12.3% for 2023 overall). The average likelihood of applying for a credit card limit increase over the next 12 months ticked up slightly in 2024, compared to 2023.
- The average perceived likelihood of a future credit application being rejected, conditional on applying over the next 12 months, was higher in 2024 relative to 2023 for credit card, auto loan, and mortgage refinance applications, and lower for mortgage and credit limit increase applications. The rate increased by 0.6 percentage point for credit cards, 2.3 percentage points for auto loans, and 2.2 percentage points for mortgage refinance applications, while it decreased by 0.7 percentage point for mortgage loans and 2.6 percentage points for credit card limit increase requests.
Detailed results are available here.
About the SCE Credit Access Survey
The SCE Credit Access Survey, fielded as part of the Survey of Consumer Expectations, provides information on consumers’ experiences and expectations regarding credit demand and credit access. Every four months, SCE panelists are asked whether they applied for credit in the past 12 months and the resulting outcomes. They are also asked about their expectations of applying for credit over the next 12 months and the perceived likelihood of those applications being accepted. This information is collected for five specific credit products: auto loans, credit cards, credit card limit increases, mortgages, and mortgage refinancing. Survey findings, in instances with sufficient sample sizes, are also presented separately by age and self-reported credit score subgroups. See the SCE Credit Access Survey Chart Guide and FAQs for additional information.
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