Banks Keep Tightening Credit to Reduce Risk

Banks aren't easing lending requirements, a Federal Reserve survey shows.
Publish date:

NEW YORK (TheStreet) -- The Federal Reserve's quarterly survey on bank loans showed that lending remained tight for consumer loans over the past three months.

The April

Fed survey

of 56 domestic banks and 23 U.S. branches and agencies of foreign banks revealed that most are in no hurry to ease lending requirements and are maintaining stringent standards for lending. Some banks made further decreases in credit lines and tightened credit standards on new credit card applications.

This helps explain why revolving credit, which is primarily credit card usage, fell for the 17th consecutive month in February. Revolving credit has declined by almost $100 billion since the fourth quarter of 2008.

Issuers acted quickly to protect themselves from additional risk and loss during the economic downturn. Tightened credit standards, higher credit scores and lower limits are currently the parameters for lending by credit card issuers.

According to the survey:

A total of 15.2% said credit standards for credit card applications tightened somewhat, while 78.8% said standards remained unchanged.

Some 26.5% have tightened credit limits (35% of large banks), and 64.7% said limits remained the same.

A full 11.8% increased the minimum required credit score, and 85.3% said credit score requirements remained basically unchanged.

A total of 22.9% decreased the size of credit lines for existing cardholders, while 74.3% said credit lines remained equal to previous figures.

-- Reported by Bill Hardekopf of

Bill Hardekopf is the chief executive officer of

, which compares and rates more than 1,000 credit cards. He is the co-author of "The Credit Card Guidebook."