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Americans are having trouble getting approved for loans and other financial products. federal reserve began to aggressively raise interest rates,
a new research A study published by Bankrate found that 50% of applicants for loans and financial products have been denied since the Fed began raising interest rates in March 2022.
Apply for credit card Those most frequently rejected were 14% of Americans who reported that their bank refused to issue them a new credit card, and the remaining 6% reported that their bank refused to issue them a balance transfer card. Others were denied credit limit increases on existing credit cards (11%), personal loans (10%), car loans or leases (9%), insurance (8%), and mortgages (5%). .
Banks are tightening lending standards in response to rising interest rates.
High inflation continues to weigh on America’s budget
People walk past Wells Fargo Bank on Broadway on December 20, 2022 in New York City. (Photo by Michael M. Santiago/Getty Images / Getty Images)
Fed policymakers have raised interest rates significantly over the past two years, approving 11 rate hikes in hopes of curbing inflation. cool the economy. In just 16 months, interest rates rose from near zero to more than 5%, marking the fastest pace of tightening since the 1980s.
Rising interest rates tend to raise interest rates on consumer and business loans, forcing employers to cut spending and slowing the economy. Rising interest rates have pushed the average interest rate on a 30-year mortgage above 8% for the first time in decades. Borrowing costs for everything from home equity lines of credit to auto loans and credit cards have also skyrocketed.
More Americans looking to re-enter the workforce to offset the blow of high inflation
“One way higher borrowing costs combat inflation is by slowing the flow of credit to households and businesses,” said Bankrate analyst Sarah Foster. She said: “Lending is not stopping, but lenders are becoming increasingly selective in who they approve for loans, evaluating factors such as income, outstanding debt and payment history.”
when Credit situation is getting tighter, Banks have significantly raised their lending standards, making it more difficult to obtain a loan. Borrowers may have to agree to stricter terms, such as higher interest rates, as banks seek to reduce financial risk. Less lending means fewer high-cost spending by consumers and businesses.
When credit conditions get tight, banks dramatically raise their lending standards, making it harder to get a loan. (Justin Sullivan/Getty Images/Getty Images)
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The percentage of Americans who are denied loans and financial products is “significantly” higher for those with lower credit scores. For example, approximately 73% of individuals with a “bad” credit score between 300 and 579 were denied access to a loan or financial product, whereas individuals with a “fair” credit score between 580 and 669 were denied access to a loan or financial product. %, 55%. “Good” credits range from 670 to 739.
“One of the best ways for Americans to protect themselves from rising interest rates is to focus on their credit scores, which may be a factor that has a bigger impact on Americans than the Federal Reserve itself.” Foster said. “Reduce your debt-to-income ratio, make payments on time, and do not exceed 30% of your available credit.”
