Is credit from banks still tight? I have read several articles today, some saying that credit is loosening up and others saying it's still tight.
According to the Federal Reserves latest survey of loan officers, there is a sign that the credit crunch's grip may soon ease up. The loan officers I know are just miserable. Why? Because it is so hard to get a loan approved right now. Credit is still tight. Consumers showing so much as an NSF on there bank statements are having trouble getting loans. So is credit still tight?
The 15% of banks that responded to a survey said they imposed stricter standards on credit then they have over the last three month period. The survey also showed that some were reducing there standards, but very few actually are.
The banks that tightened there requirements did so for the same reasons they did during the last survey period back in July. The most common reasons were:
1. Reduced tolerance for risk.
2. An uncertain economic outlook.
3. Problems specific to industries.
Banks have been tightening there standards for loans over the past two years. Banks have constantly been tightening in these three areas of credit:
1. Higher credit scores.
2. Higher interest rate spreads.
3. More collateral and shorter maturities.
Bank lending has fallen sharply since they have been tightening credit along with a reduced demand for credit.
I am in a catch twenty-two over this as we always preach living a debt free lifestyle, but will we ever get out of the hole without it?
Whenever we've gotten out of a recession we have always had the availability credit to use as a shovel. This time it's different.
In one way we need a cleansing and on the other hand we will not get out of this without good news and to get people spending. If they aren't working and those who are can't get the loans they need, what will we do? Maybe we just need to meet in the middle somewhere.
Have you been turned down for a loan or credit card lately? What was the reason why?
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