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.