Vision Credit Education, Inc.

With tighter credit, those who have little income and poor credit scores have been shut out of most lending opportunities. We would expect that the higher income households would fare much better and they have, but not that much better. A sizable percentage of higher income households were still denied credit according to a recent survey.

A 2008 survey measured credit denials among households covering the 4 months from August and November of 2008. The survey was conducted online in November and December of 2008.

Lower income households reported higher rates of denied credit. Households earning $35,000 up to $50,000 reported that 24% of them were denied credit while a full 26% of households earning less than $35,000 had their applications declined.

The lower income group is not much of a shock, since credit channels tend to open up during good economic times to those that have fewer resources for repayment. When the economy slows, these lower income families have drastically reduced lending options. What credit options they do have come with even worse terms than normal.

Higher Income Households Hit Also

A total of 1,010 households responded to the survey, with 16% indicating they had recently been denied credit. Sixteen percent of households with income from $50,000 up to $75,000 reported they had been denied credit, which matched the survey average.

Higher income households are normally more likely to have home equity that they can tap into at reduced rates. However, this option has all but dried up as households have either already tapped into available equity, experienced a drop in their home value or both!

Households earning from $75,000 up to $100,000 reported that 11% had been denied credit during the survey period. Still another 7% of households earning over $100,000 were denied credit. While this may not sound like a huge number, the fact that the survey was covering a period of only 4 months suggests that a much larger percentage of higher and lower income households alike may have been denied credit at some point in 2008.

There are still credit options available for all households, but they do require a better credit score than before if you want to improve approval chances as well as the credit terms. The best opportunities appear to be through credit unions which still are granting credit to applicants that at least have moderately good credit scores. Banks tend to price credit a bit higher. The best rates are requiring credit scores above 760.