New Jersey residents looking for new credit might still have a hard time finding it. Even though the markets have started to recover, banks are still wary of opening themselves up to too much liability.
According to a recent survey by the Federal Reserve, only a small percentage of loan officers have loosened their requirements for new credit card customers. Most have maintained their lending standards, and some have even imposed stricter requirements.
Only 14 percent of loan officers made it easier to get a credit card last quarter. However, of that 14 percent, none reported that their credit requirements had changed “substantially.” A little more than 2 percent made it harder to get a credit card.
The numbers are similar when it comes to increased credit limits. About 8 percent of loan officers relaxed their standards for allowing an existing card holder access to a higher credit limit, while 5.4 percent imposed stricter standards.
Banks Still Feeling the Burn of the Recession
Much of this reluctance to extend credit can be traced back to the losses banks experienced at the start of the recession. When the economy tanked, millions of Americans lost their jobs and could no longer afford to make their credit card payments. Some went into default, while others filed for bankruptcy to have their debts discharged.
Banks responded by lowering credit limits, raising interest rates and making it much harder for consumers to get new credit. In the second quarter of 2008, nearly two-thirds of loan officers imposed stricter overall lending standards.
Stricter standards tend to hurt consumers with poor credit the most. Sometimes, their interest rate goes up so much that they can no longer afford their monthly payments. Others see their credit limit cut, even though they are paying down their balance.
Source: CreditCards.com, “Americans Want More Credit, But Banks Remain Leery, Fed Says,” Kelly Dilworth, Jan. 30, 2012.