A new Federal Reserve survey of bank lending officers shows that some banks are tightening their lending standards for credit cards and other consumer loans. Most people might not even notice these changes, and the changes are not likely to be drastic or devastating for people who need access to credit. But this trend is worth knowing about if you’re in the market for a new credit card. Some banks might soon require a higher minimum credit score or give applicants a lower credit limit thanks to these changes.

Let’s look at the new Fed survey about credit card standards and see what it might mean for your next credit card application.

Why banks are tightening credit card standards

The Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) is a regular survey from the Federal Reserve that tracks overall attitudes among banks’ senior executives. The goal: See how banks feel about credit standards — and whether (and how much) they’re willing to lend to customers.

Making loans is banks’ biggest reason for being in business, but sometimes banks have to cut back on the number of loans they issue. Banks are constantly calculating and making risk assessments about how much money they can afford to lend (and which customers they want to lend to) compared to how much money they have in deposits and in reserves. Credit cards are part of this mix.

If a bank believes that it’s taking on too much risk, or that customers are less likely to repay their loans and credit card balances, banks might tighten their credit standards — which means they issue fewer loans and decline more credit card applications.

Times of higher interest rates can make banks less likely to lend money, especially when banks have to compete harder for deposits. When it’s harder for banks to get deposits from customers, this can lead to tighter credit standards from banks — less money going into the banks (as deposits) can mean less money coming out (as loans).

Three big trends affecting credit card applications

According to the April 2024 SLOOS from the Federal Reserve, “significant” numbers of banks are tightening their standards for credit card loans. This includes raising required minimum credit scores, lowering credit limits, or making it harder to approve loans for customers who don’t already have qualifying credit scores. Another change that more banks are making is to increase the “spreads” of interest rates over the banks’ cost of funds — charging higher interest rates (APR) on loans.

Here are a few insights from senior bank executives interviewed by the Federal Reserve SLOOS survey that show how new credit cards could be getting more difficult to obtain.

1. 21% of banks have tightened standards for credit card applications

The Fed survey found that about 21% of banks overall, and 32% of large banks, said that in the past three months, their standards for approving credit card applications have “tightened somewhat.”

2. 22% of banks are tightening credit limits

Some bank executives also told the Fed that their banks are tightening credit standards, in the form of lowering credit limits. In fact, 22% of banks, and 23% of large banks, said their credit limits for credit cards have “tightened somewhat” in the past three months.

For example, a customer who might have been approved for a card with a $10,000 credit limit a few months ago might now only be approved for $8,000. Existing credit card customers can also have their credit limits lowered by the bank, at any time. This can hurt your credit score by increasing your credit utilization ratio if you’re carrying debt.

3. 24% of banks are raising minimum required credit scores

The survey also found that banks are raising the minimum credit scores required to get a credit card. Of those surveyed, 24% of banks and 32% of large banks told the Fed that their minimum required credit scores have “tightened somewhat” in the past three months.

This survey doesn’t show any specific credit scores or ranges of credit scores affected. If you are struggling with your credit score, you might want to use a credit-building tool or secured credit card. Try to increase your credit score before you apply for your next credit card; with credit standards tightening, it’s more important than ever.

Bottom line

Some banks are tightening credit standards, and this means that some applicants might be declined for loans or credit cards, even though they would’ve been approved a few months ago. But this doesn’t mean it’s impossible for most people to get approved for credit cards.

If you have a good credit score, you might not notice any effects of these tighter standards; most banks might still be happy to offer you a credit card. But you might want to ask for pre-approval (with a soft credit check) before you let the bank do a hard credit pull that affects your credit score. And be prepared to ask for reconsideration if you get declined for a credit card.

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