It’s tougher to get a credit card, car loan

Banks tightening standards despite thriving economy

Banks are getting more picky about which consumers they’re approving for loans as borrowers with spottier credit histories struggle to keep up with payments.

The data is surprising in light of an economy and labor market that have been rolling along. Consumers are benefiting from solid job growth, faster pay increases and low debt levels. And the stock market is at record highs.

Yet 11.7% of banks tightened standards for auto loans in the first quarter, up from 3.3% late last year and the highest level on records dating back to 2011, according to the senior loan officer survey released by the Federal Reserve last week and Deutsche Bank.

Credit card standards were toughened by 8.3% of banks, compared to none in the fourth quarter. And criteria for consumer loans excluding credit cards were tightened by 7.3% of banks, up from 2.4%.

The results don’t reflect a suddenly shaky economy or an imminent pullback on lending by banks and other lenders for prime loans, says Matthew Mish, head of global credit strategy for UBS. Instead, he says, with the economic recovery in its eighth year, lenders are extending their reach to borrowers at low- and middle- income levels to increase revenue.

Joe LaVorgna, Deutsche Bank’s chief economist, says banks are being more cautious with credit cards in part because of low interest rates that have crimped profit margins. He expects standards to ease as rates rise.

The number of subprime auto loans ( those requiring a FICO score of 600 or lower) that were at least 90 days late hit the highest level since 2010 in the third quarter at 6 million, according to the New York Fed. The share of delinquent personal loans and credit card debts also edged up in the third quarter to 3.53% and 1.33% respectively, according to TransUnion and UBS.

AP Consumers are getting more worried about defaulting on loans.