- 32% of millennials were denied a loan for a credit card, down from 62% in 2019, according to a recently published study.
- Current moratoriums on rent and evictions, along with the current pause on student debt payment have helped prevent consumers from defaulting on loans.
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32% of millennials were rejected for a credit loan in 2020, a sharp drop from the more than 60% denied in 2019, according to a new study from YouGov that was commissioned by Bankrate.
The most popular type of loan that was declined was a credit-card loan, which made up 19% of the total number of responses. Other types of loans mentioned in the survey included mortgage and car loans.
Overall, 21% of adults were denied for a loan of some sort in 2020.
While 32% may seem high, it's lower than last year, where 62% of millennials were rejected when applying for the same loans, as reported by CNBC. Higher credit scores and moratoriums on rent and student loan payments have helped millennials get approval as well.
Another likely factor in the drop is the fact that credit scores tend to trail behind actual economic conditions, which means the impact on scores won't be seen for some time. In fact, the average credit score actually rose by 3 points from 708 in April to 711 in July.
But if another stimulus fails to pass soon, there is a chance scores will begin to decline, according to a report from The Wall Street Journal. On top of that, 12 million people are expected to lose their unemployment benefits at the end of the year, which could lead to more consumers defaulting on already existing loans. The pause on student loan payments ends on December 31, along with some rent and eviction moratoriums.
This momentum also may not last for long as banks are reigning in their standards for credit approval, according to a recent survey done by the Federal Reserve. Around 1 in 3 banks have raised their credit standards for credit card approval in the past three months, as reported by CNBC.
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