Federal Reserve Survey Finds Many Americans Can’t Get Credit

A survey released by the Federal Reserve Bank of New York found consumers are having a hard time getting credit. In 2024, rejection rates for credit applications, such as mortgages, auto loans, and credit cards, went up, according to the Fed report.

Roughly 21% of credit applications were rejected so far this year, the survey revealed. In 2023, the rate was just slightly over 20%. For consumers with credit scores less than 680, lenders were especially cautious.

Specifically, 20.7% of new mortgage loan applications were turned down. Of mortgage refinance requests, 25.6% were rejected. About 11.4% of people applying for a car loan were denied credit, the highest rate in over 10 years.

The survey, which is conducted by the Fed every four months, also noted an uptick in consumers’ belief that the ability to obtain credit over the next 12 months will remain difficult. In addition, consumers are less likely to apply for new loans, with only 23.1% of respondents saying they’ll apply for at least one type of credit. Last year, the figure was 25.9%.

Lenders and Consumers Are Under Pressure

As consumers struggle to pay high-interest loans and credit cards, banks and lenders are lowering their “tolerance for risk.” Borrower profiles reportedly deteriorated in 2024, leading to potential risk and lower profit for financial institutions. Additionally, it appears many U.S. creditors are preparing for new government regulations that will make it harder to compete.

The Consumer Financial Protection Bureau (CFPB) released updated rules in October that influence how financial companies use consumer data. The new “open banking” guidelines require banks and lenders to share data with other institutions without hassles upon request of the customer. The goal is to make it easier for consumers to switch financial providers, thereby making it easier to shop the competition.

Overall, consumers seemingly have a negative view of their personal finances. A survey released by Primerica last month found just over half of middle-income households did not like the look of their money situation, and many felt “stressed.”

The economy, inflation specifically, remains a major concern for consumers. Even though the inflation rate has deflated in recent months, consumers are still feeling the pressure in the grocery store and at the gas pump.