Credit Repair Blog

Lenders Are Tightening Their Credit Score Standards—What Will You Do About It?

If you have been paying attention to the U.S. economy in September 2008, this should come as no surprise to you: Banks are making it harder for consumers to get credit.  A recent “Senior Loan Officer Opinion Survey” conducted by the United States Federal Reserve confirms that in July 2008, Banks were already starting to tighten their credit standards.  One of the key findings was that banks are requiring people to have higher credit scores to qualify for loans and credit cards.

The Survey, which can be found here, includes a number of interesting facts.  The bottom line is this: Credit standards are getting tighter, and it is going to be increasingly difficult for consumers to get credit cards, home loans, and other loans if they have poor credit scores.  Here’s a quick summary:

About 65 percent of domestic banks—up notably from about 30 percent in the April survey—indicated that they had tightened their lending standards on credit card loans over the past three months, and about the same fraction of respondents—up from roughly 45 percent in the April survey—reported having tightened standards on consumer loans other than credit card loans. In addition, considerable fractions of respondents reported having increased minimum required credit scores on both types of consumer loans and reduced the extent to which such loans were granted to customers who did not meet their bank’s credit-scoring thresholds. Finally, large net fractions of banks noted that they had lowered credit limits on credit card accounts over the past three months, and increased interest rate spreads on consumer loans other than credit card loans. On balance, about 35 percent of domestic banks—up from roughly 25 percent in the April survey—expressed a diminished willingness to make consumer installment loans relative to three months earlier.

Here’s an example of some of the data presented in the survey.  The table below shows the survey answers to the question of whether the Banks were tightening their credit score requirements (that is, were they requiring higher credit scores to qualify?) or loosening their requirements.  NONE of the banks suggested they were lowering their credit score requirements—MOST of the banks are requiring higher credit scores.

	All Respondents		Large Banks		Other Banks
	Banks	Percent	Banks	Percent	Banks	Percent
Tightened Considerably	3	6.1	2	7.4	1	4.5
Tightened somewhat	26	53.1	15	55.6	11	50.0
Remained basically unchanged	20	40.8	10	37.0	10	45.5
Eased somewhat	0	0.0	0	0.0	0	0.0
Eased considerably	0	0.0	0	0.0	0	0.0
Total	49	100.0	27	100.0	22	100.0

How are you going to deal with this new, more difficult economy?  Are you going to sit back and keep getting denied the credit you deserve?  Or are you going to take a few minutes to improve your credit score, so you get the credit you deserve?  In this environment, you need to look out for yourself, and take steps to make sure you have the best credit score possible.