Credit increase for first time since 2007

The nationwide credit crunch is by no means over, but a new report by the Federal Reserve shows that it has become easier for consumers to get a credit card for the first time in three years. This fact became apparent after the Fed conducted a survey of senior loan officers, whose responses provide insight into whether different banks are increasing their credit or not.

Of the loan officers surveyed, none said that their banks had made their loan terms more stringent during the second fiscal quarter of 2010, and eight percent stated that their banks had actually loosened their lending standards somewhat, making more credit available to consumers. The majority of banks in this study of 57 domestic banks and 23 foreign banks with U.S. branches noted that their standards neither increased or decreased during this time. In contrast, a Fed survey done two years ago showed two-thirds of banks were tightening their lending terms. This marks the first time since 2007 that more banks eased loan standards than tightened them.

Although more credit has become available in the last few months, many consumers are not yet seeing any credit increases. The amount of credit available is still limited, and interest rates remain high, even for current cardholders in good standing with their banks. There are signs, however, that credit card offers are making a comeback as well. The market research company Synovate noted in a study conducted for the second fiscal quarter of this year that 640.8 credit card offers were mailed to Americans; this is an 83 percent increase in mailings from a year before.

More credit card offers does not improve the situation on current cardholders, 16 percent of whom have had their credit limits lowered in the past fiscal quarter. Additionally, 11 percent of all cardholders had their interest rates raised during the same time period. On the other hand, new card offers have involved stiff competition between issuing banks, with improved rewards programs and extended introductory rates, in order to tempt customers into applying for new credit cards.

-Seth Berger