Smart Borrower Blog

Credit Card Companies Tighten Up on Qualifications

Dec 12th, 2018 @ 10:25 PM by Amber Nelson

U.S. consumers are having a harder time getting the credit they want, according to a recent report from the Federal Reserve Bank of New York, perhaps a sign that lenders are nervous about rising delinquency rates.

The Fed’s “Credit Access Survey” found that credit card issuers rejected 20.8% of applications in October 2018, up 14.4% from the year before. The rejection rate for those applying for a credit card limit increase rose to 31.7%, up from only 24.9% in October 2017.

More consumers also had credit accounts shut down by their lenders, with 7.2% of survey respondents reporting an involuntary account closure in the last 12 months. That’s up from 5.7% a year ago and 4.2% in 2016.

These results are surprising given the seeming strength of the economy, including the lowest unemployment rate in almost 50 years.

Lenders may have taken on more risk in the past few years than they can comfortably handle. Credit card delinquency rates have been on the rise since the end of 2018, and the biggest increase has been among borrowers with credit scores on the lower end.

That may be a result of looser lender standards starting in 2013 when credit card account originations jumped significantly. Credit card balances have grown from $670 billion in the 2013 third quarter to $844 in the 2018 third quarter. Lenders may have opened up the lending spigots to bad credit borrowers then and are now getting nervous that approving those accounts was not in the best interest of their bottom line. As delinquencies rise, lenders might be trying to curb their loses and stick to approving only the most credit-worthy borrowers.

Credit card issuers are especially sensitive to trends in delinquencies as credit cards are generally the first thing most consumers stop paying when things get tight financially. Credit card lenders watch closely for signs of recession and try to shore up their risks before economic trouble hits full on.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to and

Leave a Reply