Household Credit Behavior and Perceptions of Consumer Credit Availability

The financial crisis resulted in a general tightening of credit policies by financial institutions. The SHED asked several questions pertaining to the demand for credit by respondents in 2013. Based on the results of the survey, just under one-third of the U.S. adult population had applied for some type of credit in the prior 12 months (figure 6). An additional 15 percent reported that they had completely put off applying for credit because they thought they would be denied. After applying for credit, one-third were turned down or given less credit than they applied for, including 29 percent who were denied credit at least once (table 3). Among those who did apply for credit in the prior 12 months, 26 percent also reported that they put off a separate credit application during the same time period because they thought they might be turned down.

Table 3. In the past 12 months, has each of the following happened to you?
Percent, except as noted

	Yes	No
Denied credit	29.1	67.8
Offered less credit than applied for	14.9	81.2
Number of respondents	1,359

Note: Among those who reported having applied for credit in prior 12 months (33 percent of survey respondents).

 

Mortgages

Respondents are reasonably confident in their ability to obtain a mortgage if they were to apply for one. Just over a third of all respondents were very confident that their mortgage application would be approved should they decide to apply, while 19 percent were somewhat confident. Twenty-nine percent of respondents were not confident that their mortgage application would be approved, and 17 percent simply did not know if it would be approved. Among those who were either somewhat or not confident that their application would be approved, 21 percent said they would be very likely to apply for a mortgage should it become easier to get approved for a mortgage, and 28 percent would be somewhat likely to apply.

The survey sheds some light on the extent to which race and ethnicity continue to be points of divergence when it comes to perceived access to credit. More specifically, the survey finds that experiences with access to, and expectations about, credit do vary. For instance, confidence in one's ability to obtain a mortgage differs substantially by race/ethnicity. Among non-Hispanic whites, 57 percent were confident that they would be approved for a mortgage should they apply, relative to 42 percent of Hispanics and 38 percent of non-Hispanic blacks (table 4). The reason for the gap in confidence between whites and minorities also differs by race/ethnicity. For Hispanics, this difference is largely driven by the share who report that they are not confident that their application would be approved (37 percent versus 27 percent for whites), while for blacks it is driven by the significant share who don't know if they would be approved (28 percent versus 14 percent for whites).

That said, since race/ethnicity is correlated with numerous other factors that may affect confidence in one's ability to obtain a mortgage, regression analysis was used to control for these other characteristics. The differences in confidence between whites and blacks and between whites and Hispanics are both statistically significant in a probit regression that also controls for age, income, gender, employment, and marital status, but no longer statistically significant when also controlling for education. This suggests that other factors such as racial and ethnic differences in education levels are important for fully understanding the question about confidence.

Table 4. If you applied for a mortgage today, how confident are you that your application would be approved? (by race and ethnicity)
Percent, except as noted

Race/ethnicity	Confident	Not confident	Don't Know
White, non-Hispanic	57.3	27.0	14.2
Black, non-Hispanic	37.7	32.6	28.0
Other, non-Hispanic	54.5	22.8	21.9
Hispanic	42.2	37.2	18.3
2+ races, non-Hispanic	48.7	35.6	15.7
Overall	52.5	29.0	16.9
Total number of respondents	4,134

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Credit Cards

The majority of respondents with credit cards reported that they pay off their balances in full each month (57 percent). Among the remaining 43 percent who revolve their credit card balances, 82 percent had been charged interest on their balance at some time in the prior 12 months. Also, among those who revolved their balance, 53 percent had made only the minimum payment, 42 percent had carried a balance using a low-interest rate balance transfer offer, and 12 percent had gotten a cash advance from their credit card at some point in the preceding 12 months.

As was the case for mortgage credit, access to a credit card differs substantially by race/ethnicity. Just 20 percent of non-Hispanic whites do not have at least one credit card, compared to 47 percent of non-Hispanic blacks and 30 percent of Hispanics. Respondents' confidence in their ability to get approved for credit also varied by race/ethnicity (table 5). As was the case for confidence that one's mortgage application would be approved, these differences in confidence between whites and blacks and between whites and Hispanics remain statistically significant when including many control variables but were no longer significant after also controlling for education levels. In the aggregate, these results suggest that race/ethnicity are still important factors when understanding consumers' experiences accessing and thinking about credit, but that the correlation between race/ethnicity and perceived access to credit may largely be a factor of other variables, such as education, that are correlated with race/ethnicity and credit.

Table 5. If you applied for credit or a loan today (other than a mortgage), how confident are you that your application would be approved? (by race and ethnicity)
Percent, except as noted

Race/ethnicity	Very confident	Somewhat confident	Not confident	Don't know
White, non-Hispanic	48.2	19.5	19.5	11.2
Black, non-Hispanic	20.8	24.5	28.0	24.5
Other, non-Hispanic	41.2	21.8	19.6	16.5
Hispanic	26.5	27.2	30.7	13.9
2+ races, non-Hispanic	36.9	18.3	30.8	14.0
Overall	41.2	21.3	22.3	13.6
Total number of respondents	4,134

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