Number of Credit Inquiries Hits Lowest Level Since 2003
The Federal Reserve Bank of New York released the Quarterly Report on Household Debt and Credit for the fourth quarter of 2018. The research found that total household debt rose to $13.54 trillion, an increase of $32 billion.
Interestingly, the Fed found credit inquiries to be at an all time low. There were less than 145 million hard inquiries in the fourth quarter 2018, compared to 218 million in the first quarter 2003 when the organization began collecting this data.
Hard inquiries, as defined by the Fed are “voluntary inquiries generated when a consumer authorizes lenders to request a copy of their credit report.” This does not include inquiries for customers with existing accounts, such as a bank sending a customer a pre-approved credit card offer. It also does not include “soft” credit pulls, like a credit verification for a background check.
A drop in credit inquiries may indicate consumers are unsure about the future of the economy. The demand for credit is decreasing, which shows consumers are planning fewer purchases in the future. But this may also indicate consumers have reached their repayment capacity. They are turning their focus to paying down current debts before incurring new ones.
Delinquency rates have steadily increased for student loans and auto loans, but are decreasing for mortgages and Home Equity Lines of Credit (HELOC). In fact, mortgage delinquencies have almost reached their lowest mark in the history of the data. They are currently at 1.1%, compared to 0.9% in late 2005 and early 2006.