Former TransUnion Insider Reveals the Next Credit Crisis (2026)
Key takeaways:
- Credit looks underpriced in several pockets while wages lag, which puts pressure on near-prime and even prime borrowers.
- Buy now pay later can mask stress by stretching purchases across paychecks without full bureau reporting. That hides risk until it shows up elsewhere.
If the labor market stays soft and inflation sticks, expect tighter underwriting, lower credit lines, and higher delinquencies through 2026. Full system retreat is unlikely, but a squeeze is very likely.
In this week’s episode of the 720 Credit Score podcast, I spoke with Matt Komos about what could trigger the next credit crunch in 2026. We covered underpriced credit, wage stagnation against rising costs, the surge in revolving balances since pre-COVID, auto delinquencies, and how BNPL, AI underwriting, and alternative data are shifting risk around the board. The headline is simple. If incomes trail expenses and lenders tighten at the same time, stress moves up the credit spectrum. The question is how far and how fast.
Frequently Asked Questions
- What signals point to rising credit risk in 2026?
- How does underpriced credit create a problem?
- Where does buy now pay later fit into this?
- Are lenders asleep at the wheel or adjusting in time?
- What does tightening look like for consumers?
- Why are auto loans such an early warning?
- Will AI underwriting and alternative data prevent a crisis?
- What is the realistic 2026 scenario and the chance of a full retreat?
- What should households do if credit tightens?
- What should policymakers and lenders watch most closely?
FAQ: What signals point to rising credit risk in 2026?
Revolving debt has climbed roughly 30 percent from pre-COVID while wages have not kept pace. Student loan payments have resumed and federal garnishment can supersede some state limits. Auto delinquencies at 60 days past due are at multi-decade highs for subprime, and early signs of stress are appearing in near-prime and prime segments. Put together, those are classic pressure markers.
FAQ: How does underpriced credit create a problem?
If pricing does not reflect true default risk, lenders extend more credit than performance will support when the cycle turns. As the labor market softens and costs stay high, loss rates catch up to the mispricing. That forces lenders to tighten lines, raise cutoffs, and pull back offers, which then removes the very liquidity households were using to bridge shortfalls.
FAQ: Where does buy now pay later fit into this?
BNPL lets consumers split purchases without traditional underwriting or comprehensive bureau reporting. Higher-income households often use it for convenience. Stretched households use it to augment income between paychecks. When budgets break, payments that are not fully reported can slide behind autos, housing, and cards, and the hidden stress appears later.
FAQ: Are lenders asleep at the wheel or adjusting in time?
Lenders are adjusting. Tightening is already visible on cards and personal loans, alongside portfolio reviews. Alternative data and AI models are being used to monitor early warning signals and trim exposure at the margins. Growth continues for the safest tiers, with pullbacks from the bottom up.
FAQ: What does tightening look like for consumers?
Expect lower credit limits, more denials at the edge of eligibility, and fewer balance-transfer or promo offers. Installment originations slow even as balances remain high. More frequent account reviews can reduce lines after a late payment or a score drop. The squeeze usually shows up first in near-prime.
FAQ: Why are auto loans such an early warning?
Vehicles became more expensive to buy, finance, insure, and maintain. Longer loan terms kept payments manageable on paper but left borrowers underwater for years. When budgets crack, a repair plus a high payment is hard to carry. Rising 60-day delinquencies signal households are running out of slack.
FAQ: Will AI underwriting and alternative data prevent a crisis?
They help lenders sort applicants faster and spot trouble sooner, but they do not raise wages or lower prices. These tools reduce mispricing and improve monitoring, yet they cannot fix a broad income-expense gap. Expect targeted tightening, not cycle elimination.
FAQ: What is the realistic 2026 scenario and the chance of a full retreat?
Base case is rising delinquencies through 2026 with tightening from the bottom up. Super-prime and strong prime continue to receive credit while losses are managed conservatively. The estimated probability of a full credit shutdown is under 10 percent. A squeeze is far more likely than a freeze.
FAQ: What should households do if credit tightens?
Protect housing and mobility first. Build a small emergency buffer, even if it starts tiny. Avoid stacking BNPL obligations. If balances are slipping out of control, get advice early from a nonprofit counselor and a local bankruptcy attorney before missed payments cascade.
FAQ: What should policymakers and lenders watch most closely?
Watch labor market breadth, wage growth versus core costs, revolving utilization, early-stage delinquencies, and auto roll rates. Track BNPL performance as reporting expands. If these trend the wrong way together, expect sharper tightening and faster credit migration.
Disclaimer: The content on this blog is for informational and educational purposes only and does not constitute legal or financial advice. Watching our videos and reading our blogs does not create an attorney-client relationship. Always consult a licensed bankruptcy attorney or financial professional about your situation.
