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It's a bad time to have bad credit. A quarterly survey of bank risk professionals released today from FICO reveals that while 73 percent of respondents expect the volume of credit applications to increase or stay flat over the next six months, 46 percent think approval criteria will get stricter and 38 percent believe the approval rate for applications will decline. The study authors noted a "growing credit gap" between credit supply and demand.
Tough approval standards aren't anything new, of course. The survey findings are consistent with previous research from FICO Labs, which found that over a year-long period ending in April 2010, the number of credit cards opened by consumers fell by 17.7 percent, compared to the previous 12 months. The number of inquiries only dropped by 3 percent, though, indicating that credit availability dropped despite continued demand for new credit cards.
Respondents in the new survey were also pessimistic on credit card delinquencies. Nearly 85 percent of bankers that manage credit cards expect the level of delinquencies to increase or hold steady through the end of the year.
As for credit card debt, the researchers noted that opinions were "mixed": While 34 percent of respondents expect average credit card balances to "decrease somewhat", 39 percent expect them to "increase somewhat" and 22 percent think they will "stay about the same."
Don't expect looser lending standards anytime sooner. A whopping 99 percent of respondents believe their firms will either increase or maintain the priority placed on risk management during the next budgeting cycle.
The survey was conducted in July 2010 by The Professional Risk Managers' International Association with 235 risk professionals participating. You can read the rest of the findings at PRMIA.org.
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