20 July 2023
The New York Federal Reserve Bank’s monthly Survey of Consumer Expectations has revealed worrisome trends in credit application rejections in the United States. The report shows that the overall rejection rate for credit applicants has soared to its highest level since June 2018, reaching 21.8 percent compared to 17.3 percent in February. This rise in rejections was observed across various age groups, with the most significant impact felt among individuals with credit scores below 680.
The rejection rates for different types of credit applications also saw substantial increases. Auto loan rejections hit a record high since 2013, rising from 9.1 percent in February to 14.2 percent. Rejections for credit card applications, credit card limit increases, mortgages, and mortgage refinance requests climbed to 21.5 percent, 30.7 percent, 13.2 percent, and 20.8 percent, respectively.
The survey further noted that the average probability of loan rejection sharply increased for auto loans, credit cards, credit limit increases, and housing-related credit. These findings have raised concerns among analysts about the possibility of an impending recession, particularly since high rejection rates are often considered a leading indicator of economic downturns.