Of course, that characterization of the lending market is an exaggeration, but the newest figures from the Federal Reserve do reveal that banks have been tightening standards on everything from mortgages to credit cards – again.
For example, around 60 percent of respondents said that they had employed stricter criteria for credit card loans during the past three months. This means that it is likely to be harder than ever to get a new card unless you have a near-flawless credit score.
And new accounts are not the only ones under intense scrutiny from providers.
The Fed added a question to this quarter’s survey asking banks whether they had recently raised or lowered the credit limits of existing cardholders.
Approximately 60 percent said they had cut limits for nonprime borrowers, which may not come as much of a surprise considering their risky status.
But one out of five respondents also noted that they reduced the limits on prime borrowers’ accounts – a trend which demonstrates lenders’ increasing wariness of exposing themselves to any danger whatsoever, even if the cardholder has a stable track record.
Keep these figures in mind the next time you consider throwing out mail that arrives from your credit card company – the envelope could contain important information about your credit limit or your account.
A lower credit limit has the potential to wreak havoc on your credit score, so make sure you are informed about these changes.
“[Lower credit scores] could be catastrophic for some people,” consumer advocate John Ulzheimer told the Wall Street Journal. “And the problem is that the consumer doesn’t realize it’s happening.”
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