The COVID-19 pandemic had a significant effect on credit markets throughout 2020, with credit application and acceptance rates falling after February, according to the Federal Reserve Bank of New York’s latest Credit Access Survey released today. The survey gauges consumers’ experiences and expectations regarding credit over the previous year.
The results show that rejection rates overall declined from 17.6% of all those who applied for credit in 2019 to 15.7% in 2020. However, rejection rates increased by 3.8 percentage points—or 27%—between February and October 2020, as the COVID-19 pandemic intensified in the U.S. and lenders tightened credit standards on consumer loan products. Over the past 12 months, the Fed found that rejection rates for credit card, auto loan and credit limit increase applications all rose, while rejection rates for mortgage refinance applications declined.
Application rates, meanwhile, fell 11 percentage points during 2020, falling from 45.6% in February to 34.6% in October, a new series low. The share of applicants who were too discouraged to apply for credit in the past 12 months was 7%, up slightly from last year when the average was 6.4%. The share of survey respondents who applied for credit in the past 12 months declined in 2020, coming in at 39.8%, compared to 45.8% a year prior. Meanwhile, the share of respondents who said they are likely to apply for credit in the next 12 months rose from 24.9% in 2019 to 26.1% in 2020.