What consumer behavior signals about credit union risk

Consumer behavior is shifting in important ways, and these signals are increasingly relevant for credit unions monitoring delinquency pressures and portfolio risk. After several years of unusual economic conditions and rapidly changing financial realities, members are making different choices about borrowing, meeting monthly obligations, and managing household budgets.

By understanding these patterns early, credit unions can prepare more effectively for rising risk and develop strategies that support both member financial health and institutional stability.

One of the clearest trends in the marketplace is a widening gap between those who are financially resilient and those facing renewed financial strain. A recent TransUnion analysis of national credit data shows that the percentage of consumers classified as super prime increased to 40.9 percent. At the same time, the share of subprime borrowers has shifted back to levels seen before the pandemic began.

This trend shows that more consumers are at the highest and lowest ends of credit risk. Fewer borrowers are now in the middle tiers, which used to make up a large part of credit union membership.

This polarization suggests that traditional assumptions about member credit behavior may no longer apply. As a result, credit unions may need to reevaluate their risk segmentation strategies and update models to better reflect today’s more extreme distribution of member credit profiles.

Another important development is the upward trajectory of delinquencies. Federal Reserve research shows that after reaching historic lows during the pandemic, credit card and auto loan delinquencies have climbed to levels comparable to those observed during the Great Financial Crisis in the late 2'000s. Auto loan delinquencies, in particular, have risen among lower income households, which reveals increasing financial pressure on some of the most vulnerable consumer groups.

Within the credit union sector, delinquency trends reflect this national pattern. The National Credit Union Administration reported that federally insured credit unions saw delinquency rates increase to 95 basis points in the third quarter of 2025. This marks a rise from the previous year and suggests the early stages of a more challenging credit environment.

For credit unions, these changes show a need to update loss forecasting. They should also review capital planning assumptions, and it is important to strengthen early intervention strategies. These strategies help members before they fall into serious delinquency.

Borrowing trends also reveal important insights into today’s risk environment. A recent Trustage report shows that total consumer credit balances across all lenders grew only 0.3 percent year over year, compared with the long term norm of about 5 percent. The same report found that credit union new auto loan balances declined by 2.3 percent in the first half of 2025, while first mortgage loan originations increased by 27 percent during the same period.

Membership growth slowed to 0.8 percent, suggesting that consumers may be less financially confident and more cautious about major financial decisions. These shifts highlight the need for credit unions to reassess product demand, loan pricing, and member engagement strategies. Credit unions must closely check concentrations in higher risk areas like auto lending. In these areas, delinquency increases often appear sooner.

Alongside consumer behavior, broader economic and operational risks are also increasing. A recent Rochdale report highlights elevated inflation, increased policy uncertainty, and the rise of technology driven threats. These external pressures influence consumer liquidity, loan demand, and repayment capacity. As a result, they contribute to a more complex and rapidly evolving risk landscape for credit unions to navigate.

Credit unions should improve early warning systems. They need to update segmentation models and compare their patterns to national indicators. They should also reach out to members who show early signs of strain. Refining underwriting and pricing strategies will also be essential as borrowing behavior continues to shift.

To explore more insights and stay informed about issues affecting credit union performance, visit SWBC’s Financial Institution Group's website.