Financial Fragility Increased in 2023 While Credit Access Decreased
New survey results from the Federal Reserve Bank of New York highlight recent trends in financial fragility and access to credit. Unfortunately, the news is not good, especially for younger households and those with weaker credit histories.
The latest Survey of Consumer Expectations (SCE) Credit Access Survey reports that the likelihood of an average household coming up with $2,000 to cover an unanticipated expense in the next month fell to 64 percent in October, a ten-year low, from 69 percent a year ago. Households headed by individuals 40 years old or younger put their odds of meeting such an expense at just under 60 percent on average, while those headed by individuals 60 or older put theirs at a somewhat higher 72 percent. Those with credit scores of 680 or below are at particular risk, estimating their likelihood at only 33 percent on average.
Accompanying this elevated degree of financial insecurity is an erosion in credit access, evidenced by declines in both application and rejection rates over the last year. The overall application rate fell to just over 41 percent in October, down from almost 45 percent a year ago. Of those applying for credit, just over 21 percent were rejected in October, up from 19 percent a year ago. Those with credit scores of 680 or below experienced a rejection rate of more than 52 percent. Meanwhile, a lower share of households than a year ago expects to apply for any type of credit over the next 12 months, while a higher share believe they will be rejected if they do apply.
With the economy slowing as we head into 2024, these results are a further indication that the foundations supporting the consumer sector are growing increasingly wobbly.
November 30th, 2023
