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It’s a little harder for U.S. consumers to get credit as lenders retreat during the coronavirus crisis, The Wall Street Journal reported.

The major reason is that banks can no longer easily determine who is creditworthy.

“Banks are looking very carefully at their underwriting models to see if they need to be adjusted to factor in latent risk,” Robert Strand, senior economist at the American Bankers Association, told the WSJ.

As the unemployment rate reached nearly 15 percent last week and more than 40 million Americans are collecting jobless benefits, it’s likely that some are behind on their payments.

But the missed payments aren’t reflected in their credit scores and are not uniformly recorded on borrowers’ credit reports, the newspaper reported.

A provision in the CARES Act says that if a lender provides a forbearance on a mortgage, car loan or other payment, they can’t report them as late to credit reporting companies.

Data from TransUnion, one of the nation’s biggest credit bureaus, revealed that from March 1 through May, there were more than 100 million accounts on a deferred debt payment program, the newspaper reported.

As a result, the Federal Reserve Board said last week that the nation’s biggest U.S. banks could be saddled with as much as $700 billion in loan losses.

“Without accurate information, their only option is to pull back on credit,” Michael Abbott, head of banking for North America at consulting firm Accenture PLC, told the paper. “Banks don’t know who is going to pay and who isn’t. It’s like flying blind into a credit storm.”

By early April, 33 percent of banks told the Fed they had increased their minimum credit score requirements for credit cards over the previous three months, up from 14 percent in January.

Equifax Inc., another large credit bureau, said the number of loans has fallen. About 79,000 personal loans were issued for the week ending May 10, compared with 226,000 in the week ending March 22, a 65 percent dip as customers and lenders pulled back.

As car sales fell, so did auto loans and leases, to 266,000 from 390,000, nearly one-third lower during the same period. Credit card originations totaled 483,000, down from 856,000.

Fair Isaac Corp., the FICO score provider, said the company plans to launch an index that will appear next to loan applicants’ scores to predict how likely the applicants are to withstand financial difficulties during the downturn.

“It gives [lenders] that extra filter of how a person is going to handle an economic downturn,” FICO CEO William Lansing told the paper. “The increase in approvals will be more than the increase in rejections.”



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