Creditnet News Story
Banks to tighten lending requirements
Tuesday, November 10, 2009
By Thomas Astery
Some borrowers can expect to see rate changes despite having a prime credit score.
Even borrowers with prime-level credit scores are going to see certain rates and fees increasing in the coming months.
According to a survey from the Federal Reserve, 50 percent of responding banks expect to increase interest rate spreads and reduce credit limits for prime borrowers. Furthermore, 45 percent said they would raise the minimum limits required for credit card accounts, and 40 percent said they expect to raise annual rates on prime borrowers.
Consumers in the nonprime category may expect to see an even more difficult situation when it comes to credit card terms. Of the banks polled, 75 percent said they would increase interest rate spreads for these borrowers. Furthermore, 45 percent of banks surveyed said they would increase annual fees for nonprime borrowers.
"In the October survey, domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households," a report from the Fed stated.
As banks continue to tighten standards on loans, the amount of consumer credit that is available may see a dip in the future. Such has been the trend of late, as recent numbers from the Fed show that total consumer credit fell by 6 percent during the third quarter of this year.
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