Writer: Eric Bank
Editor: Lillian Guevara-Castro
Reviewer: Adam West
Key Takeaways
- Subprime originations on bankcards reached 20.2% of newly created accounts, but credit limits still trail total market growth.
- Car and consumer loan delinquencies continue to mount, even as credit card measures remain steady.
- Lenders must rescript their underwriting and servicing models to stay ahead of shifting borrower behavior.
Total U.S. consumer debt was at $17.86 trillion as of June 2025, according to the latest information from Equifax. That’s a 2% increase from the previous year — mostly due to mortgage debt — but outstanding balances increases are being observed in other categories.
The report’s a mixed bag for subprime-specialized lenders: nonprime originations are up, but so are risk indicators.
Credit card delinquencies held relatively flat but hinted at a downdraft that’s materializing on other credit fronts.
That segmentation poses legitimate challenges to lenders serving consumers with scores in the 620 or below, especially related to model recalibration and identifying early borrower distress issues.
Mortgage debt still makes up roughly three-quarters of the mix, but the real subprime story is in the other $4.65 trillion — non-mortgage credit. That category includes 36% from auto loans and leases and 24.2% from credit cards. And in both of those spots, initial signs of distress are beginning to emerge.
Subprime Card Growth Continues — But Cautiously
Bankcard balances rose 4.2% to $1.07 trillion between June 2024 and June 2025. Even so, average usage fell a hair’s breadth to 20.8% from 21.2%, possibly an indication of more prudent spending or earlier payment.
During that span, card account totals increased 5.7%, possibly a sign of wider growth in account holders across credit tiers.
In the subprime market, that increase was an outlier. As of March 2025, 20.2% of new cards went to borrowers with VantageScores below 620, up from 17.9% the year before. Don’t be fooled — those borrowers qualified for only about 3% of all credit offered, so lenders haven’t really relaxed the reins.
Auto and Personal Loans Show Higher Stress
While card delinquencies barely shifted — 2.79% this June from 2.83% last year — the same cannot be said for the auto loans. Delinquencies there worsened across the board, and the serious (60 or more Days Past Due) balances reached as high as 1.44%, up four basis points from a year before.
That may seem minor, but on subprime books facing greater loss severity, those shifts can escalate quickly. Extended loan durations and rising vehicle costs have left many borrowers under greater pressure.
Personal loans also seem precarious, even though public data didn’t provide detailed breakdowns. But with lenders encountering diverse credit classes and facing the unsecured loans category — the growing gap between segments makes recalibrating the risk models more difficult and time-sensitive.
Lender Response: Tighten, Monitor, Adapt
Changes in borrower behavior do not afford lenders the comfort of complacency. The time has arrived to recalculate their plans — not just those for introducing fresh accounts, but also the plans for invoking the early warning systems.
The installment and auto loan units may need to elevate their reserves, recast their collection plans, and tighten their borrower criteria.
Credit cards, on the other hand, could increase predictability via more consistent payment behavior. Cards also give lenders insight into borrower stress and spending patterns in near-real time.
To lenders fluent in account-level insights, the delinquency and usage patterns from Equifax will plug easily into fraud prevention and pricing analysis.
The bottom line is that subprime originations seem to hold up well, but the margin for error continues to shrink. With storm clouds gathering beyond the card portfolios, lenders require sharper tools, faster reflexes, and more agile underwriting strategies.
