Banks relax credit card restrictions as loan demand reservoirs
Banks are relaxing the standards for qualifying for credit cards and personal loans – and it’s not because they are feeling generous.
After tightening credit at the start of the pandemic, a deluge of defaults that banks were preparing for never materialized. Instead, consumers squatted at home and used a tide of stimulus checks and generous unemployment benefits to pay off their credit card debt.
With the demand for loans declining, banks are looking to revive their businesses by offering more attractive credit cards and lending options. Banks also allow customers to transfer credit card debt at a zero percent interest rate and even eliminate the need for a credit score.
According to Federal Reserve data, 27% of banks relaxed lending standards for customers to get credit cards in the first quarter and 17% of banks relaxed auto loan requirements.
“The fact that consumers today are stronger than they were on average before COVID, as well as the hope that the economy will improve, is very supportive of lenders who are starting to shrink. release ”, Warren Kornfeld, analyst at Moody’s Investors, told the Wall Street Journal.
Mortgages are a notable exception. Some banks have told the Fed that they recently lowered the standards for government guaranteed mortgages, according to the Journal. But mortgages are still difficult to obtain for many home buyers. In a hot housing market, many banks only lent to buyers with crisp credit and large down payments.
Overall, lending standards remain stricter than they were before the pandemic, according to the newspaper, and most lenders said they did not change their underwriting standards in the first one. trimester.
The expansion in access to credit comes a day after JPMorgan and nine other banks work to expand lending to people living in disadvantaged communities.