Tariffs, Rising Delinquencies and the Truth About ‘Bad Debt’

Latest TransUnion study sheds light on the state of credit in America

Over the last year, studies — and even TransUnion’s own research — have suggested many consumers have turned to credit products to help stay afloat as the cost of living has risen. However, as TransUnion® recently discovered, that research might not paint the full picture. 

According to TransUnion’s newly released Q1 2025 Credit Industry Insights Report (CIIR), inflation-adjusted balances for consumers actually declined in real dollar terms across the majority of credit risk tiers from 2020 to 2025.

While total balances in nominal dollar terms (before adjusting for inflation) across all consumer credit products rose 28% during that time period, the cumulative Consumer Price Index increase was nearly 24%. When adjusted for inflation, total balance growth in real dollar terms is more modest, amounting to $0.5 trillion over the five-year period, an increase of closer to 3%. 

Ultimately, the findings indicate consumers are likely accumulating less bad debt than previously thought. For most consumers, their card balance growth has been less than the rate of inflation. Quite possibly, they’re not over-extended, are managing their debt smartly and have further borrowing capacity.

Credit cards: Serious delinquencies appear to have peaked

For the second consecutive quarter, and similar to trends reported at the tail end of 2024, consumer-level delinquencies of 90+ days past due decreased, marking the first consecutive quarter of year-over-year (YoY) declines since the height of the pandemic in 2020.

Additionally, going back to Q4 2024, we saw a modest 0.1% rise in total originations YoY, representing the first YoY growth in six quarters. For the first time in eight quarters, subprime originations grew (+2.9% YoY), while super prime originations grew for the second consecutive quarter (+5.3%).

Even as originations slightly increased, credit line amounts on new cards continue to trend downward, indicating consumers are being more discerning with their credit card usage.

Q1 2025 credit card trends 

Credit card lending metric (bankcard)	Q1 2025	Q1 2024	Q1 2023	Q1 2022
Number of credit cards (bankcards)	563.0 million	543.1 million	523.2 million	490.0 million
Borrower-level delinquency rate (90+ DPD)	2.43%	2.55%	2.26%	1.62%
Total credit card balances	$1.07 trillion	$1.02 trillion	$917 billion	$769 billion
Average debt per borrower	$6,371	$6,218	$5,733	$5,026
Number of consumers carrying a balance	172.0 million	169.0 million	165.3 million	158.9 million
Prior quarter originations*	19.4 million	19.3 million	20.6 million	21.2 million
Average new account credit lines*	$5,612	$5,628	$5,421	$4,634

*Note: Originations are viewed one quarter in arrears to account for reporting lag.

Click here for a Q1 2025 credit card industry infographic. For more credit card industry information, click here for episodes of Extra Credit: A Card and Banking Podcast by TransUnion. 

Unsecured personal loans: Delinquencies are also down

The unsecured personal loan market has grown: In Q4 2024, originations hit an all-time high — with gains across all risk tiers. This surge also drove growth in total new account balances (to $34 billion).

That said, in Q1 2025, while a record 24.6 million consumers had balances (+5% YoY), average balances per consumer only grew for above prime tiers. That follows five consecutive quarters of declines in average new account balances.

What’s driving this trend? Lenders are being more cautious about to whom and how much they’re willing to loan. That selectiveness is paying off in one big way: Delinquency rates are down, which is a good sign moving forward.

Q1 2025 unsecured personal loan trends

Personal loan metric	Q1 2025	Q1 2024	Q1 2023	Q1 2022
Total balances	$253 billion	$245 billion	$225 billion	$178 billion
Number of unsecured personal loans	29.8 million	28.1 million	26.9 million	23.9 million
Number of consumers with unsecured personal loans	24.6 million	23.5 million	22.4 million	20.4 million
Borrower-level delinquency rate (60+ DPD)	3.49%	3.75%	3.91%	3.25%
Average debt per borrower	$11,631	$11,829	$11,281	$9,896
Average account balance	$8,496	$8,737	$8,356	$7,448
Prior quarter originations*	6.3 million	5.0 million	5.2 million	5.7 million

 *Note: Originations are viewed one quarter in arrears to account for reporting lag.

Click here for additional unsecured personal loan industry metrics. Click here for a Q1 2025 unsecured personal loan industry infographic.

Mortgage: Originations are up — but tariffs could change that

Q4 2024 saw a big bump in mortgage originations (rising by just over 30%), with more than three quarters being purchase originations. That was the first time purchase originations increased since early 2021. Home equity originations also rose 11%, marking the third consecutive quarter of YoY increases.

While those are positive signs the mortgage market is — or was — experiencing a rebound, the current administration’s tariffs could impact near-term inflation, and mortgage rates are expected to remain elevated above 6% in the next quarter. If mortgage rates do stay up, originations for both purchases and refinances are likely to fall.

Q1 2025 mortgage trends 

Mortgage lending metric	Q1 2025	Q1 2024	Q1 2023	Q1 2022
Number of mortgage loans	53.6 million	53.2 million	52.9 million	51.5 million
Consumer-level delinquency rate (60+ DPD)	1.36%	1.14%	0.90%	0.80%
Prior quarter originations*	1.2 million	0.9 million	1.0 million	2.9 million
Average loan amounts of new mortgage loans*	$366,443	$327,102	$327,050	$315,661
Average balance per consumer	$266,843	$260,745	$253,514	$241,203
Total balances of all mortgage loans	$12.5 trillion	$12.1 trillion	$11.8 trillion	$10.9 trillion

* Originations are viewed one quarter in arrears to account for reporting lag.

Click here for additional mortgage industry metrics. Click here for a Q1 2025 mortgage industry infographic.

Auto loans: Trade policy could reverse gains

The Federal Reserve interest rate cuts in late 2024, rising inventories and incentives had driven an 8% growth rate across all tiers in auto loan originations in Q4 2024. New vehicles made up 47% of those financed in Q4 2024, the highest Q4 share for new vehicles since pre-pandemic times.  

We anticipate originations will increase in the near future as consumers rush to buy new cars before tariffs go into effect. While the immediate upside is promising, long-term tariffs could impact affordability, which could stall the growth the industry is experiencing.

One area to watch is delinquency rates: 60+ DPD delinquency rate increased by five basis points YoY in Q1 2025, exceeding the peak delinquency rate of Q1 2009. Elevated delinquency rates for prime and below tiers are especially noteworthy against a backdrop of still-high costs and inflation.

Q1 2025 auto loan trends

Auto lending metric	Q1 2025	Q1 2024	Q1 2023	Q1 2022
Total auto loan accounts	80.0 million	80.1 million	80.1 million	80.5 million
Prior quarter originations1	6.2 million	5.8 million	5.8 million	6.5 million
Average monthly payment NEW2	$759	$746	$741	$657
Average monthly payment USED2	$526	$521	$521	$509
Average balance per consumer	$24,413	$24,035	$23,214	$21,606
Average amount financed on new auto loans2	$42,877	$41,222	$41,539	$40,184
Average amount financed on used auto loans2	$26,494	$25,655	$26,260	$27,995
Consumer-level delinquency rate (60+ DPD)	1.56%	1.50%	1.34%	1.09%

¹Note: Originations are viewed one quarter in arrears to account for reporting lag.

²Data from S&P Global Mobility AutoCreditInsight, Q1 2025 data only for January and February.

Click here for additional auto industry metrics. Click here for a Q1 2025 auto industry infographic.

Make sure you have all the information

To ensure you have the most complete analysis, view the on-demand Q1 2025 Credit Industry Insight Report webinar for expert commentary on the findings.