Tight credit continues to be a problem even after billions have been pumped into banks. Banks claim they are lending, but many people are still unable to get a loan. Banks want even more money, but lawmakers are starting to question whether or not they really are lending. Banks claim they are lending, yet consumers and businesses say they can’t get a loan, so what’s really going on?
Well, it’s a combination of a few things. Banks that received bailout money may have money to lend, but for obvious reasons their lending standards have changed. Banks are becoming more selective in terms of who gets approved. Not only that, but many are in dire financial health. Many banks are using some of this money to help shore up their balance sheets instead of immediately releasing it to individuals and businesses. It’s a fine line to walk where regulators want a healthy bank and the government wants to put money in the hands of people and businesses. It’s hard to accomplish both immediately with the same funds.
The Federal Reserve revealed that of the banks receiving money from the government:
- Almost 60% of banks said they had tightened lending standards on consumer loans and credit cards
- About 40% trimmed the size of home equity lines of credit.
- About 30% reduced credit card account limits, and 45% raised the minimum credit score required to be approved for a card.
- 80% had tightened lending standards on commercial real estate loans
But what have you seen in recent months? Have you applied for a loan or credit card only to be denied? Do you have pretty good credit but still can’t find lending, or do you have not-so-good credit yet have been lucky enough to get approved? I’ve been hearing and seeing a lot of different scenarios with those I work with, so I’m curious to find out what others out there are seeing.
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
I have $6,000 debt in old utility bills due to a relationship break. Have not been able to attempt to make payment on these bills yet. I have a great job now that allows me a small payment on a vehicle and I need one! No car, no job....anyone have any suggestions for me. I don't want to go out and apply for credit, as I know each credit check hit makes already bad credit look worse and I am trying to get out of the hole, not farther in.
Thanx for any suggestions
I never had a problem getting a mortgage, refi, equity line, and equity loan. I've done all of the above sometimes more than once in several months of each other. But now first I was turned down for a refi, now I'm trying to just get an equity line of credit so that my wife and I can clear up some credit cards and buy two newer used trucks (an oxymoron if I do say so myself) I've been to several different banks asking for 58k the first one was Chase (my wife works there) they are a big joke their employee discount amounts to $5 off a month from any loan you get (whoopie doodle) next they deny me but offer me $11k , wamu wont even consider putting a loan through and don't believe that chase would even offer me anything. Next I just recently applied to Bank of America . I don't know what america they operate in but it must be the america from the unpolitically correct 60's when minorities were denied because they werent deemed desirable. The underwriter called my home and told my wife that based on my zipcode they cant give me a loan due to short sales and foreclosures. I live near the water in a good part of Lindenhurst, N.Y. but since the zipcode encompasses the south and north of town they are lumping me in with the ghetto area downtown. This is discrimination which has nothing to do with a bad economy I just might see an attorney. My last choice is a credit union bank . Supposedly it's easier to get a loan with one of those. My credit is in the high 700's my house is worth $420k I owe $283k I have a good job at a law firm, my wife works part time at a bank . I have over 11k in assets from a 43b plan and 23k in retirement. I should be approved quickly but instead I've been subjected to one lender asking me to get three co=signers, another insulting me with 11k and another discriminating against where I live and I'm white! What the hell is going on this world anyway. What do you do when your car doesnt work anymore and you need to buy a new one. I don't know about you but I don't have 20k just lying around. I'm a homeowner and pay inflated mortgage, town tax and flood insurance premiums. It's time for a revolution.
Jen, we had the same problem. Successfully refinanced last month, but it was like pulling teeth. I think they called our employeers five times to verify that we were "still working there."
It's crazy - but at least they're being more careful than before. We didn't need ANY documentation when we first bought the house 18 months ago.
I just applied for a Lowe's Credit Card to get 10% off our new refrigerator since we were already spending more than we'd originally budgeted. I was approved immediately for $9K, which is less than my two highest credit cards. The guy completing the application for me acted like it was really high.
My husband and I bought our first home in November, we both have very good-excellent credit. The bank asked lots of questions--our mortgage broker told us it was an unusual number. (They even made us explain a 4 week period where my husband was unemployed 2 years ago, which was while we were moving between states!) Eventually it all went through, over and done. Now we're trying to refinance to drop our rate a full point (yipee!) and the questions are back and there are even more. They wanted to know why our credit was checked twice in November. (Uh, because we moved and had to set up a new gas and electric account!) They wanted pay stubs from even farther back. They wanted all kinds of documentation about why I was listed on my mom's credit card over 10 years ago when I was in high school (and I was taken off YEARS ago). The dumbest was they wanted to know why some of our pay stubs had different addresses. (We just MOVED! You financed our house, remember?) In the end, they seemed satisfied with our answers and the refi should go through this week, but it was a little nerve wracking! I can't imagine what they ask when you don't have good credit.
all of my FICO scores are over 700, i've only got 6,000 in CC debt and my debt to available credit ratio is less than 30%. yesterday i applied for a balance transfer from one credit card at 11% to another at 0%, and a secondary transfer from one credit card to another to decrease my ratio on that card, and i was denied for the former but approved for the latter.
also, 6 months ago, i had 7 credit cards (only 4 of which i ever used). now, i only have 4 (the four i use) and the other three have been cancelled by the credit card companies. i didn't do anything wrong, they just closed the accounts and sent me a letter in the mail. i'm waiting for BOA to look at my $10,500 credit limit and knock that down a bunch too, which will do wonders on my score.
i'm in "debt paydown" mode right now so anything i'm doing credit-related isn't in the mindset of needing additional credit to buy anything, i just want to hasten my goals by being smart about accruing less interest. obviously this economic climate doesn't really promote that kind of mindset though. so i guess i'll have to suck it up and pay the interest on the cards and maybe take a few more months to pay them off.
Well, December I had to get a car loan to be able to qualify for bankruptcy. And even with my super crappy credit, I was approved for the loan. Though at a steep 18% interest.
You may find news on shadow banking helpful as well here, as that's a large part of why banks are still not lending as much as they ought to be.