In an October 2023 survey conducted by the Federal Reserve, the Board of Governors observed that big-time lenders and other major U.S. banks are less likely to approve new applications given the current economic climate and the fall of several regional banks, including Silicon Valley Bank, First Republic, and Signature Bank last year.

Most banks are tightening application requirements for nearly every borrower, including businesses. The Feds survey found that banks and lenders are less likely to approve a new auto loan or credit card applications for borrowers with a FICO score or equivalent of 620 to 680.

Borrowers will need to bulk up on their credit scores this year, as the Fed's survey suggests that banks and lenders are more likely to approve auto loan and credit card applications for borrowers with a FICO score or equivalent of 720 or higher.

In fact, some industry data provided by Chicago-based online credit lender CreditNinja revealed that more than 53 percent of Americans that have applied for a credit card, loan or auto vehicle have been rejected due to a poor credit score. More surprisingly, Americans aren't estranged from debt, with roughly 80 percent of American adults owning some sort of credit lender, paying up billions in loan fees each year.

Consequently, demand for loans has plummeted sharply throughout much of last year. Roughly 60% of banks cited a weaker demand for home mortgages during the third quarter of last year. This was a not-so-surprising jump, considering around 43% of banks cited dwindling demand in the second quarter.

Mortgages are among the biggest loans consumers will typically take out in their lifetime. Although mortgages and other big-ticket purchases, including business, auto, and personal loans are some of the loftier debt consumers tend to take on, interest rates are squeezing their already tight budgets.