New Report Finds Half of Loan Applicants Have Been Denied Since Fed Rate Increases Began Two Years Ago

Mar 13, 2024Banks & Credit Unions, Financial Literacy, News

According to a new Bankrate report, half of applicants have been turned down for a loan or financial product since the Federal Reserve began raising interest rates in March of 2022. 17 percent of applicants have been denied multiple times.

“One of the ways higher borrowing costs wrestle inflation is by slowing the flow of credit to households and businesses,” said Bankrate Analyst Sarah Foster in a press release announcing the report’s findings. “Lending doesn’t stop, but financial firms grow pickier about who they approve for a loan, assessing factors such as income, outstanding debt and payment history.”

Consumers experienced the most denials with credit card applications, with 14 percent of consumers being turned down for a new credit card and six percent being turned down for a balance transfer card. 11 percent were denied a credit limit increase on an existing card.

10 percent of consumers were turned down for a personal loan, nine percent for a car loan or lease, eight percent were turned down for insurance, six percent for a debt consolidation loan, five percent for a mortgage loan, five percent for a home apartment rental, and three percent for a home equity loan or home equity line of credit.

Consumers with lower credit scores saw the highest rates of rejection, with 73 percent of consumers with “poor” credit more likely to be denied. Only 29 percent of consumers with “exceptional” credit were turned down. 82 percent of those who were denied reported that it negatively impacted their finances in some way, with 32 percent saying it left them more stressed about their finances and 23 percent saying that they turned to alternative financing to access the credit they needed.

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