Consumers Report Higher Credit Rejection Rates, Expect Fewer Credit Applications

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 SCECredit 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 45.8%. 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:

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 SurveyChart Guide and FAQs for additional information.

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