Credit still hard to come by: Fed survey

08.19.09
By Lewis Green

If you want to open a new credit card account or increase your limit, you'd better have a good credit score.

According to the newest figures from the Federal Reserve, consumer lending standards at the nation's banks are still tight. This means that despite signs the recession is easing, obtaining credit remains difficult.

On the bright side, the proportion of banks saying they are tightening their lending criteria for credit cards decreased significantly, from 60 percent in April to 35 percent in July.

Meanwhile, the share of lenders who said they have imposed stricter standards on other types of consumer loans shrank from 45 percent to 35 percent during the same time period.

But do these declines mean credit standards are set to relax in the near future? Probably not, the survey suggests.

Approximately one-third of respondents said they anticipated that lending standards for prime credit card borrowers would continue to remain tighter than average for the foreseeable future.

Meanwhile, one-quarter said they would probably return to more normal levels in 2011 and an equal proportion said this would probably happen before that time.

And for non-prime borrowers? Banks painted a bleaker picture, with two-thirds saying that lending criteria would probably not return to longer-term average levels in the near future.

The Fed's data also confirmed what many consumers have been reporting for some time now: their credit card limits are being slashed.

More than 48 percent of banks surveyed said they have reduced limits on consumer credit card accounts either "somewhat" or "considerably."

In July, 19 percent of people responding to a Credit.com poll said their credit card issuer had recently decreased their credit limit.

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Banks have been cutting consumers' credit limits.