Cashflow Data Shows Financial Stress Shifting Toward Near-Prime Borrowers
Guest Editorial by Brian Reshefsky, CEO, EDGE
Among nonprime applicants, those with the highest income and liquidity saw stress rise through 2025 until it matched riskier borrowers by Q1 2026. In Q2, their stress remained elevated even as riskier applicants appeared to pull back.
Credit unions would ordinarily expect near-prime members to be more financially secure than riskier subprime members. They are expected to default less often, typically earn more, and maintain higher account balances.
EDGE’s recent Emerging Credit Insights report shows that those advantages did not necessarily translate into lower immediate financial stress. In Q2 2026, near-prime applicants averaged about $6,700 in monthly take-home pay and $1,300 in daily account balances – far above the levels observed among riskier applicants – yet they were more likely to show signs of financial stress.
Nearly one in seven near-prime applicants experienced at least one insufficient-funds event or debt-settlement occurrence during the quarter, compared with roughly one in nine riskier applicants. For the first time since EDGE started reporting this series going back to Q1 2025, the near-prime group showed the highest level of financial stress.
A shift more than a year in the making
The shift had been building for more than a year. Financial stress among near-prime applicants rose from roughly 9% in Q1 2025 to nearly 14% in Q1 2026, bringing it roughly in line with riskier applicants. In Q2, the near-prime rate held nearly steady at almost 14% while stress among riskier applicants declined to about 11%.
The persistence of the near-prime reading is as important as the increase that preceded it. Riskier applicants showed signs of pulling back during the quarter, but near-prime applicants did not show the same broad retreat. Their income and liquidity remained comparatively strong while insufficient-funds and debt-settlement activity stayed elevated.
A member can still earn a relatively strong income, maintain a meaningful balance, and remain current on reported credit while beginning to experience pressure. Insufficient-funds and debt-settlement activity show when incoming cash and outgoing obligations are no longer lining up cleanly.
What cashflow reveals sooner
That divergence matters because the underlying signs of stress appear in cashflow data well before their consequences reach a credit report. An insufficient-funds event or debt-settlement payment is visible when it occurs, while any resulting delinquency may not appear in the credit file for another two to three months.
The lag is structural. A borrower may first receive a statement, pass the due date, become 30 days delinquent, and then wait for the creditor’s next reporting cycle. The strain may therefore be visible in the deposit account for weeks or months before the credit file reflects it.
Some obligations may never appear in traditional credit data at all. In Q2, near-prime applicants with detected buy-now-pay-later (BNPL) activity made average monthly payments of about $270, roughly $100 more than riskier applicants. Near-prime BNPL payment levels remained near recent highs even as those among riskier applicants declined.
Payments to other lenders showed a similar divergence. About 30% of near-prime applicants had paid three or more lenders in the 90 days before applying, a level that has remained broadly consistent over the past year. Among the riskiest applicants, however, more than 10 percentage points fewer had paid three or more lenders in Q2 than in the prior quarter.
Neither measure proves distress on its own. But obligations missing from a traditional credit report reduce the cash available for other needs and can leave lenders with an incomplete picture. Alongside insufficient-funds and debt-settlement activity, they help explain how applicants with stronger headline finances could show greater immediate strain.
The credit file remains essential, but it captures a different view. It shows how a borrower has managed reported obligations over time, while cashflow data shows how that borrower is earning, spending, repaying, and saving today – including activity that may reach the credit file later or never appear there at all.
How to interpret these findings
The EDGE analysis draws on millions of credit applications serving nonprime consumers. Unlike panel-based or self-reported research, it reflects applicants at the moment they seek credit in live underwriting environments, based on a complete view of their cashflow. Because that population differs from the broader universe of credit union members, the findings should be understood as evidence of an emerging pattern rather than a forecast for any individual institution’s portfolio.
EDGE groups applicants by expected default risk using its cashflow-based score. The labels describe relative risk within the analysis, not reported bureau-score bands. Income and balances remain important measures of financial capacity; the findings show that they are incomplete on their own.
What this means for credit unions
Where credit unions hold the deposit relationship with members, they have an opportunity to monitor account activity for emerging signs of stress, obligations not reflected on the credit report, and other changes in financial condition. That visibility can support better lending and portfolio decisions, but it can also help identify members who may benefit from financial counseling or other assistance before temporary strain becomes a more serious credit problem.
The value extends beyond the original credit decision. An application and credit report capture a member at a point in time, while income, balances, and payment obligations continue to change after a loan is made. Ongoing cashflow visibility can help a credit union recognize when a previously stable member begins to encounter pressure or when a member who appeared strained begins to recover.
Earlier visibility can also inform member outreach, giving credit unions more opportunity to offer counseling or other support before missed payments accumulate. The takeaway is not that near-prime members suddenly belong in a higher-risk category, but that risk tiers alone cannot capture changes in current financial condition.
By pairing the credit file with cashflow insights, credit unions can identify emerging stress sooner, account for obligations that may not appear on the report, and respond with better-informed lending, monitoring, or member support.
Brian Reshefsky is CEO of EDGE, which says that almost half the U.S. population is unserved or underserved by traditional risk-scoring methods that look only at past payments and balances of credit accounts as a proxy for future risk. By looking beyond a credit score, EDGE says it provides insight into financial activities and behaviors that are empirically proven to be much more predictive of creditworthiness for these consumers.
