CFPB Report Shows Substantial Decline in Credit Applications in March

According to a report issued last week by the Consumer Financial Protection Bureau (CFPB), consumer credit applications considerably declined in March, likely as a result of the COVID-19 pandemic. The number of applications is measured by lenders’ inquiries when consumers apply for new lines of credit. 

“By the end of March, applications for most categories fell between 30 and 50 percent, with relatively larger decreases among consumers with higher credit scores,” the Bureau wrote in a data point post published to accompany the report.

In the report’s introduction, the Bureau noted that they focused on inquiries “because they are among the first credit market measures to change in credit card record data in response to changes in economic activity.”

The report found that between the first and last week of March, new mortgage inquiries dropped by 27 percent, auto loan inquiries declined by 52 percent, and revolving credit card inquiries dropped by 40 percent in comparison to data collected in previous years. The dips are more noticeable for consumers with high credit scores, likely because those consumers tend to have more adaptability in their credit needs.

For several credit categories, the unemployment insurance claims share directly correlates to the decline in inquiries. Since the unemployment rates and the COVID-19 case rates vary by state, the results differ geographically.

“The South and Midwest experienced relatively smaller drops, while the Northeast and California experienced relatively larger drops,” the report reads.

The report is based on the CFPB’s Consumer Credit Panel, a national sample of about 5 million unidentified credit records. The Bureau receives monthly updates of any available sampled credit records. To read the full report, click here.