Consumer debt delinquency is rising

Consumer debt delinquency rose in the fourth quarter to its highest level in almost five years, suggesting financial struggles persist across the U.S. amid higher inflation and interest rates, Bloomberg reported.

Delinquent debt refers to financial obligations — such as loans or credit card payments — that have been delayed past their due dates, which may in turn affect credit scores. According to a Federal Reserve Bank of New York report, roughly 3.6% of debt was delinquent in the fourth quarter of 2024, with total household debt rising to a record $18 trillion.

Researchers from the New York Fed said auto loans are a major stressor for consumers. The rate of auto loans that transitioned into serious delinquency — defined as 90 days or more overdue — rose to 3%, the highest it’s been since 2010.

“Higher car prices combined with higher interest rates have driven monthly payments upward and have put pressure on consumers across the income and credit score spectrum,” the researchers, led by Andrew Haughwout, wrote in the report. “Used car prices have since declined from the peak, potentially leaving some borrowers underwater on those vehicles and creating potential repayment challenges.”

President Trump’s 25% tariffs on steel and aluminum could affect the industry, with automakers already worrying the cost of production will rise.

Student loan balances also grew by $9 billion last quarter, but the pause on student loan repayments during the pandemic also postponed missed payment reports to credit bureaus. That means student loan debt delinquency will likely start showing up on reports in the first quarter of 2025.