More Consumers Want Credit As Lenders Loosen Up

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More people are looking for credit and more lenders are willing to extend it, underscoring how once-tightened belts are loosening as the economy recovers from the effects of the pandemic.

The number of people who applied for a credit card in the last year rose to its highest level since before the pandemic, according to quarterly survey data released Monday by the Federal Reserve Bank of New York. Of those surveyed, 23% said they had applied for a card between June 2020 and last month, up from 19.4% in February—but still below the pre-pandemic level of 26.3% in February 2020.

Creditors also have relaxed their standards, rejecting fewer of those applications. The rejection rate for cards fell to 16% in June from a record-high 26% in February, the biggest change since the Fed started keeping track.

Lenders had been more selective about offering credit during the pandemic, shifting to less risky accounts. At the same time, many consumers—focused on their financial health with fewer opportunities to spend—eased up on applying for or using credit cards. That trend has now begun changing as consumers have more opportunity to spend money on big-ticket luxuries like vacations that weren’t possible during the worst of the pandemic.

More people—particularly those with credit scores below 760—are applying for cards, while those who already have cards are using them more now. Revolving credit balances, which consist mostly of credit card debt, reached their highest level in six months in May, according to Federal Reserve data released earlier this month.

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