A Consumer Financial Protection Bureau (Bureau) report examining the effects of the COVID-19 pandemic found that consumer credit applications declined substantially in March. Applications are measured by the number of credit pulls or “hard inquiries” that lenders perform when a consumer applies for new credit.
The report found that between the first and last week of March, auto loan inquiries dropped by 52 percent, new mortgage inquiries dropped by 27 percent, and revolving credit card inquiries declined by 40 percent compared to usual patterns seen in the data in earlier years. Additionally, the drops are significantly more pronounced for consumers with higher credit scores, consistent with the possibility that higher credit score consumers have more flexibility in either their credit needs or the timing of their credit needs.
The report also found significant geographic variation in the decline in inquiries, with states in the South and Mountain regions experiencing smaller drops and the Northeast and California experiencing the largest drops. The report relates the drop in inquiries to two variables measuring the effects of the pandemic at the state level: the COVID-19 case rate and the share of workers filing for unemployment insurance benefits in the last weeks of March. The report found a strong correlation between the decline in inquiries and the COVID-19 case rate, as well as the decline in inquiries and the unemployment insurance claims share, for some categories of credit.
The report is based on the Bureau’s Consumer Credit Panel, a longitudinal, nationally representative sample of approximately five million de-identified credit records from one of the three nationwide consumer reporting agencies. After the end of each month, the Bureau receives updated credit records for all sampled credit records, if available.