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Credit gap set to close

By Marcie Geffner · Bankrate.com
Tuesday, July 23, 2013
Posted: 4 pm ET

Consumers are likely to get exactly as much credit as they want in the second half of this year, according to the latest quarterly survey of bank risk managers by FICO, a credit scoring, data and software company in San Jose, Calif.

Sixty percent of the 149 U.S. bank risk managers who responded to the recent survey said they expected the amount of credit requested by consumers and the amount of credit extended by lenders to increase in the next six months. The difference between the supply and demand is sometimes called the "credit gap."

The survey also found 61 percent of the bankers expected the average credit card balance to increase, and 26 percent expected credit card delinquencies to rise during that time frame.

In a statement, FICO chief analytics officer Andrew Jennings said the survey, started in 2010, marked the first time expectations for the growth of credit demand didn't exceed expectations for the growth of credit supply.

"This shows the strength of the U.S. economic recovery," Jennings said. "After years of caution, lenders are now in growth mode and feeling good about extending credit, (and) borrowers are beginning to shed the frugal habits that helped them deleverage more than a trillion dollars since 2008."

Most bank risk managers expected to see decreases in delinquencies for nearly every type of loan, except student loans. Student debt was again the only area of pessimism, part of a pattern that has continued for seven consecutive quarters, according to FICO.

Other findings were also record-setters for the survey. Only 3.5 percent of respondents expected requests for credit-line increases to decline. Only 15 percent expected a drop in the approval rate for new credit. Just 7 percent expected credit card balances to decline.

The survey was compiled in May and June and analyzed with the assistance of the Center for Decision Sciences at Columbia Business School.

How do you feel about your chances of getting credit? Do you expect your credit card balance to decrease?

Follow me on Twitter: @marciegeff.

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