Credit inquiries — or when lenders check consumers’ credit files — for the past six months have fallen to the lowest level recorded by the Federal Reserve Bank of New York since it began tracking the data in 2003.
The number of credit inquiries declined to about 137 million as Americans’ overall debt rose to a record $13.67 trillion in the first quarter of 2019, according to a New York Fed report issued this month.
Source: Federal Reserve Bank of New York
The rate of credit card delinquencies — payments that are at least 90 days past due — showed an increase in the first quarter of 2019, according to the New York Fed. This means consumers might be having trouble paying off the debt they’re currently carrying.
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Why could credit inquiries be down?
There are a number of factors that could explain why the number of credit inquiries has dropped, including signals that people might be maxed out on debt.
New York Fed data shows that Americans’ overall debt hit a record $13.67 trillion in the first few months of 2019, above its last peak of $12.68 trillion in the third quarter of 2008.
It’s possible that in an environment where people feel increasingly burdened by debt, they’re less likely to want to take on more debt.
Credit card delinquencies in the first quarter of 2019 rose to 5.04%, up from 4.99% in the fourth quarter of 2018.
Meanwhile, credit card interest rates are now averaging 16.9%, the highest level recorded by the Federal Reserve since 1994. This could leave some consumers facing higher charges for carrying a balance on the credit cards they have.
A cooling housing market could be a factor as well, as the New York Fed report shows mortgage originations fell in the first quarter of 2019 to the lowest level since the third quarter of 2014.
How could this impact you?
If you’re planning to apply for credit in the near future, it’s unlikely that a metric like credit inquiries will impact you.
Still, with credit inquiries trending down and credit card delinquencies and interest rates on the rise, economic growth could be impacted. Gross domestic product — the total value of all goods and services produced annually, and a broad measure of the health of the economy — rose at an estimated 3.2% annual rate in the first quarter of 2019, according to the Bureau of Economic Analysis. But growth in consumer spending slowed from the fourth quarter of 2018.
These broad trends have implications for the economy as a whole, something that could affect you down the road. Ultimately, if people feel as if they’re carrying too much debt or interest rates are too high, they could be discouraged from spending — and the economy might grow at a slower pace.