Banks are relaxing the standards for qualifying for credit cards and personal loans – and it’s not because they’re feeling generous.
After crunching credit at the start of the pandemic, a deluge of defaults banks had braced for never materialized. Instead, consumers squatted in their homes and used a wave of stimulus checks and generous unemployment benefits to pay off their credit card debt.
With the demand for loans declining, banks are looking to relaunch their businesses, offering more attractive credit card and loan options. Banks also allow customers to transfer credit card debt at a zero percent interest rate and even eliminate the need for a credit score.
According to Federal Reserve data, 27% of banks relaxed lending standards for customers to get credit cards in the first quarter and 17% of banks relaxed the requirements for auto loans.
“The fact that consumers today are stronger than they were on average before COVID, as well as the expectation that the economy will improve, is very supportive of lenders who are starting to slack off “, Warren Kornfeld, analyst at Moody’s Investors, told the Wall Street Journal.
Mortgages are a notable exception. Some banks have told the Fed that they recently lowered the standards for government guaranteed mortgages, according to the Journal. But mortgages are still difficult to obtain for many home buyers. In a booming real estate market, many banks only lend to buyers with impeccable credit and large down payments.
Overall, lending standards remain stricter than they were before the pandemic, according to the newspaper, and most lenders said they did not change their underwriting standards in the first one. trimester.
The expansion of access to credit comes a day after reports that JPMorgan and nine other banks were working to expand lending to people living in disadvantaged communities.