Banks Tighten Credit

As the economy continues to limp, major banks continue to tighten their credit, according to a Federal Reserve survey. 

The April survey asks domestic banks about their lending practices in recent months. The survey gives a snapshot of the state of credit in the country and clues to the overall state of the economy.

Consumer credit, such as credit cards, continues to tighten in some areas. The number of banks lowering credit limits jumped over the past three months, according to the survey. About 65 percent have lowered the credit limits on new or existing clients, compared to the 45 percent of banks reporting such moves in January. That means the consumer has less available credit to use.

That figure goes along with the 55 percent of responding banks reported raising the minimum credit score a client needs to open an account, the survey said. That figure also increased from the January survey.

The good news on the credit front is that only five percent of banks stated that they were less willing to make consumer loans. That’s down from 15 percent in January and 45 percent late last year. However, 20 percent reported that there was less demand for loans, a jump from the last survey. The amount of money being loaned, of course, is a marker of the health of the economy.