Banks are tightening their standards on credit card loans in the third quarter, out of concern with the more uncertain economic outlook, according to the latest Federal Reserve survey of senior loan officers released on Monday.
Banks have increased underwriting standards for approving credit card applications for the past three quarters. In the January-March quarter, credit card standards tightened the most since 2009, according to a report from Moody’s Investors Service.
In addition to raising standards for credit cards, banks reported they are less likely to approve credit card and auto-loan applications by borrowers with FICO scores of 620 than they were at the beginning of the year.
There was no change in lending appetite for borrowers with higher scores, the Fed found.
Banks cited a less favorable and more uncertain economic environment as one reason for the reduced willingness to make the new loans.
There was also less tolerance for risk and concerns about the ability of new borrowers to repay the debt.
Most standards for loans for residential real estate were not changed in the third quarter, the survey found.
For business lending, the survey found that banks did tightened standards on commercial real estate loans. Standards on commercial and industrial loans remained basically unchanged.
The Fed surveyed 76 domestic banks and 22 branches and agencies of foreign banks. The firms received the survey in late September and responses were due in the first week of October.