Charting the Future of Consumer Credit Risk

Rising consumer debt and delinquency rates are worrying. Financial stress among consumers could dampen future spending and economic growth, possibly leading to a recession. Ascending credit losses, moreover, may hurt bank profitability as net interest income drops with declining interest rates.

Cristian deRitis

A closer look beyond the headlines reveals that credit issues are concentrated in specific consumer groups, rather than posing a widespread economic risk. Let’s now explore the current state of consumer credit to identify troubled areas and potential opportunities in 2025.

The Big Picture

Outstanding balances on consumer debt rose to $16.7 trillion in September, according to the consumer credit bureau Equifax. This reflects a 1.5% increase from last year, lower than the average growth rate of 3.9% over the past three years. The growth in outstanding balances has slowed across loan types over the past year (except for home equity lines) and has decreased year-over-year for consumer finance, retail cards and student loans.

[....]