Consumer delinquencies are close to pre-pandemic levels, and that's caused banks to lend out less money, according to the VantageScore CreditGauge September 2025 report. Consumer credit and mortgage credit delinquencies are both up.
"Banks are reining in new lending, suggesting that banks are taking a more cautious posture after a strong summer and leading to originations softening across most credit products," said VantageScore Chief Digital Officer Susan Fahy.
This shift indicates some consumer weakness despite a rising stock market and U.S. GDP growing by 3.8% year-over-year in Q2.
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Fewer People Are Opening New Credit Lines
Consumers slightly reduced their credit activity month-over-month, according to VantageScore. The report also found that the number of consumers with newly opened credit accounts is in line with pre-pandemic numbers.
For instance, 3.49% of consumers had a new credit card on file pre-pandemic. The number stood at 3.51% in September, which was a slight drop from 3.70% in August. Auto loans and personal loans are also close to pre-pandemic levels.
However, mortgages are one of the few exceptions. While 0.60% of consumers had newly opened mortgages before the pandemic, that number only came in at 0.30% in September, according to VantageScore. Mortgages still have less than half of their activity compared to pre-pandemic levels, with high interest rates and elevated housing prices being key reasons.
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Mortgage Delinquencies Inch Higher
Not only are fewer people taking out mortgages, but their delinquency rates are inching higher, according to VantageScore. Overall credit delinquencies went from 1.02% in August to 1.13% in September. That figure is close to the 1.15% delinquency rate that VantageScore recorded shortly before the pandemic.
A rise in mortgage delinquencies comes as high living costs and interest rates affect people's wallets. Elevated delinquencies have caused lenders to be more protective of their money instead of being more flexible with who receives capital.
The highest delinquency growth came from older accounts that were 90-119 days past due on their mortgage payments, according to VantageScore. It's the largest year-over-year increase among all credit products, but delinquencies were up month-over-month and year-over-year among all stages of mortgage loan delinquency.
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Consumers May Be Waiting For Better Economic Conditions
Banks aren't the only ones that are tightening their finances. VantageScore cited high interest rates, affordability, and macroeconomic headwinds as some of the reasons consumers are pulling back on taking out new credit.
Part of the delay may be due to the Federal Reserve's potential rate cuts. The Fed cut rates in September and again last week. The Fed will also meet in mid-December, which may result in another rate cut.
Waiting for the Fed to cut rates can help consumers save money if they delay their credit applications for a little longer. The Fed's actions may boost demand for credit cards, loans, and mortgages.
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