Pedestrians walk on Wall Street outside the New York Stock Exchange (NYSE) on Monday, April 6, 2026 in New York, USA.
Michael Nagle | Bloomberg | Getty Images
The closure of the Strait of Hormuz has caused global economic ramifications, driving up prices for everything from gas to medicines and causing shortages of everything from jet fuel to helium. This is impacting large companies in the market in a variety of ways, from oil majors to airlines. But closings may also be impacting something else: your credit score.
The standoff between the United States and Iran over the strait, where the mine is dug deep, which some CEOs say may take another year to fully open, has not caused credit scores to drop, but it has caused banks and other financial institutions to more closely monitor consumer credit and tighten approval processes.
“Nobody’s credit score has dropped because of Iran, but try getting approved for a mortgage with 670 FICO today and see what happens,” says Alexander Katsman, CEO and founder of Credit Booster AI, an AI-powered credit improvement platform.
The types of credit events that bankers talk about publicly are theoretical in nature, as JPMorgan CEO Jamie Dimon warned this week: “We haven’t had a credit recession for this long, so when we do have one, it’s going to be worse than people think. It could be worse.”
But Katzman said financial institutions are now tightening their belts internally, if not publicly, in areas that affect consumers. “They haven’t announced it, there’s no press release saying, ‘We’ve raised the cutoff from 660 to 700.’ It just happens,” he said.
As underwriting becomes more stringent and manual reviews become more cumbersome, borrowers who closed the process six months ago will suddenly receive a “we’ll get back to you” email without actually receiving a follow-up message.
Katsman says this is already happening in real time among customers.
“Guy joined us last week, 690 FICO, 2 years of service, $8,000 in savings. He was denied a car loan. The same profile was approved in November 2024 without any issues. His credit hasn’t changed. His risk appetite has changed,” he said, adding that the mortgage side was even worse.
David Temko, president of California-based mortgage brokerage C2 Financial, said the period of global instability has tested the discipline of everyone from loan officers to lending institutions, with credit profiles considered attractive by some, but not all, lenders moving into the rejection pile.
“As risk increases, institutions with strong infrastructure and consistent underwriting will remain stable, while others will tighten overlays, increase reserves and second-guess files that previously could be closed within days,” Temko said.
Interest rates alone don’t tell the whole story
The silver lining for the economy in 2026, which consumers were still hoping for, was a low interest rate environment with falling inflation, but war and soaring oil prices have upended the assumptions of central bank policymaking. A new Fed chair may soon be sworn in, but this week’s Federal Open Market Committee (FOMC) meeting did not cut rates as expected, and traders are now predicting no rate cuts at all until 2026.
But that may only worsen what is already becoming a difficult credit environment.
“Even if interest rates fall, access to credit could still be tight because confidence is not reflected in the interest rate table,” Temko said.
“Everyone is looking at interest rates and waiting for them to go down, but if you can’t pass underwriting, a rate cut means nothing,” Katzman said, noting that lenders in the $640-to-$700 range have added documentation requirements that essentially act as a gradual decline.
Bobby Revell, a personal finance expert at CardRates.com, a consumer credit card comparison site, said the link between geopolitical conflicts and credit scores is subtle, but true. “Lenders may be pricing in increased uncertainty, including higher inflation risks. In the case of the Iran war, we’ve seen inflation hit the U.S. economy, so naturally lenders will be more cautious,” Revell said.
Inflation rose 3.2% in March, exceeding the Fed’s 2% target.
“Because they’re volatile, they’re pricing in higher risk for themselves, and that can impact how they choose loans,” Revell said.
Fed Chairman Jerome Powell said at the FOMC press conference on Wednesday that inflation is “rising and rising,” adding that pressure from oil prices is likely to continue. But he also pointed out that it was short-term inflation expectations, not long-term inflation expectations, that were rising, and that the long-term outlook was consistent with the central bank’s 2% inflation target.
“It’s easy to see why,” Powell said of changes within the FOMC, where an increasing number of members (though still a minority) are voting against language that maintains a systemic bias toward lower rates. “That’s a good question, right? We’re seeing inflation tentatively rising a little bit. Core inflation is currently at 3.2, which is going a little bit in the wrong direction, but we know there’s going to be headline inflation coming out of the Gulf. We don’t know how much that will be. We’ll just have to wait and see.”
Short-term uncertainty could impact credit markets, even if the interest rate outlook ultimately remains tilted towards rate cuts.
“Even if mortgage rates fall, access to credit may become more difficult as lenders want to control risk. While this may be confusing for consumers, it is important to remember that credit markets are not just focused on interest rates, but also on risk and risk perception,” Revell said.
The relationship between geopolitical shocks and lenders
Mariano Truss, a professor of economics and chair of the Department of Financial Economics at Adelphi University, said there are real mechanisms by which geopolitical shocks can directly lead to a credit crunch, and the war between the United States and Iran is one such shock.
“It’s clear that as uncertainty increases, lenders will need to change their behavior beyond raising rates. Loss assumptions will creep up and lenders, already wary after years of balance sheet weakness, will become more defensive,” Truss said. Even if a last-minute mortgage passes through underwriting, it may require a larger down payment than was required before the war.
“Even if headline rates trend downward, which is unlikely due to impending changes in Fed leadership, the real cost of credit could rise if fewer eligible borrowers are available,” Truss said. He calls this the “risk channel,” in which geopolitical shocks propagate through access as well as prices.
According to Katzman, the hurdles to obtaining financing are only increasing. “They don’t say no, but they ask for so much paperwork that people give up,” he said, noting that some customers check their credit before taking out a mortgage, giving them a false sense of security.
Taurus says most households will absorb the impact, even those with good credit. However, this means a decline in car loans and home loans, leading to a decline in consumption. Truss worries that today’s tight credit markets could be a harbinger of what a more systemic dismantling of credit might actually look like. “It’s not necessarily all dramatic collisions all at once, but the doors that were open are steadily closing,” Truss said.
Meanwhile, Jeremy Schachter, a branch manager at Fairway Independent Mortgage, a national mortgage lender based in Madison, Wisconsin, is processing applications as usual, but worries that a prolonged economic shock from the war could lead to a credit crunch similar to the one experienced during the coronavirus pandemic. “When the world becomes unstable for an extended period of time, financial institutions tighten their risk tolerance as well as their guidelines,” Schacter said.
During the coronavirus outbreak, lenders began implementing stricter guidelines, particularly in the jumbo mortgage space. Investors are now demanding higher credit scores, more documentation for income stability and more proof, he said.
For now, some lenders are vowing to stick to the basics of lending.
“We’re not going to tighten our underwriting standards just because of geopolitical noise,” said Dean Rylkin, chief executive of Cardiff, a small business lending platform. “If small businesses continue to generate stable revenues and meet their obligations, capital will remain available.”
Ryulkin said approval ratings, repayment behavior and loss curves roughly tracked pre-Iran conflict conditions.
“We have to make forward-looking assumptions every day, but stable, real-time metrics carry a lot of weight,” Ryulkin said, adding that credit quality from application flow and real-time portfolio performance still have a daily impact. “Will some lenders get nervous and leave? Absolutely,” Rylkin added, but those who leave risk losing customers to competitors.
Katzman says the least consumers should do now if they’re planning a major purchase is to get their credit report far in advance. “People check their credit karma, see the same numbers as before, and assume everything is fine. Then they walk into the dealership and are blindsided,” he says. He has seen a spike in customers coming back after sudden denials, adding: “It’s not because there’s something wrong with the report, it’s because the lending environment has changed.”
