Both subprime and super prime loans are on the rise, signs of a K-shaped economy that is a ‘prescription for real trouble’

Core Insights - The share of consumers taking out subprime loans has reached its highest level this decade, indicating increasing financial stress among Americans [1][2] Consumer Credit Trends - In Q3 2025, subprime loans accounted for 14.4% of borrowers, up from 13.9% in Q3 2024, marking the highest level since 2019 [2] - Approximately 25% of the U.S. population has a FICO credit score below 660, categorizing them as subprime [2] - The percentage of subprime borrowers at least 60 days late on auto loan payments has risen to 6.43%, double the rate in 2021 [3] - Year-over-year home foreclosure filings have increased for six consecutive months as of August [3] Divergence in Borrower Categories - The share of super prime borrowers has increased from 37.1% in Q3 2019 to 40.9% in Q3 2025, with an addition of 16 million super prime borrowers since 2019 [4] - Super prime borrowers benefit from more favorable loan terms, including lower interest rates and higher credit limits [4] Overall Consumer Credit Health - Consumer-level delinquencies have decreased by seven basis points year-over-year to 2.37%, suggesting improved consumer credit health [5] - There is a noticeable divergence in consumer credit risk, with some individuals thriving while others face financial strain [6] Economic Implications - The current credit loan data reflects a K-shaped economy, where higher-income earners continue to spend on discretionary items, while lower-income earners are reducing expenditures [6] - The economic landscape is evolving towards two distinct groups, with super prime borrowers less likely to face debt issues [7]