Big market moves are loud. Credit turns are often quiet.

You can see it in small changes. A bank asks for more paperwork. A loan gets approved, but with a smaller credit line. A lender adds new rules, or a higher rate, even if the borrower looks the same as last year.

This is the quiet credit turn. It is not a crash. It is a slow change in “yes” and “no.”

Some of that quiet turn is already visible. In the Federal Reserve’s Senior Loan Officer Opinion Survey (October 2025), banks reported modest net tightening in standards for business loans (commercial and industrial, or C&I) to firms of all sizes.

The headline risk, though, is that this can happen while markets still look calm. For example, the ICE BofA U.S. High Yield option-adjusted spread (a common “risk spread” gauge) was 2.79% on January 6, 2026, which is low by crisis standards.

That mix—banks a bit tighter, spreads still tight—is why this phase is easy to miss.

In earlier cycles, credit often tightened first. The bigger break came later.

1990: The lender shift was sharp. In the Fed’s loan officer survey data, 54.4% (net) of banks reported tightening C&I loan standards in 1990:Q2. The recession that followed is dated from July 1990 to March 1991 in the NBER timeline used for official recession bars.

That episode helped popularize the idea of a “credit crunch,” where banks pull back and the economy slows even without one single trigger. Bernanke and Lown’s 1991 Brookings paper is one of the best-known discussions of that period.

2001: The same pattern showed up again. In the Fed’s January 2001 survey report, “almost 60 percent” of domestic banks said they tightened standards for C&I loans to large and middle-market firms over the prior three months. The 2001 recession is dated from March 2001 to November 2001.

2007: The credit story also started before the official recession dates. By the time of the January 2008 loan officer survey, banks reported tightening standards and tightening price terms on C&I loans (including wider spreads). The recession that followed is dated from December 2007 to June 2009.

In all three cases, the first chapter was not “everything broke.” It was “borrowing got harder.”

Today is not a copy of 1990, 2001, or 2007. But the sequence still matters.

Look at bank standards first. On FRED, the net share of banks tightening standards for C&I loans in Q4 2025 was 6.5% for large and middle-market firms, and 8.3% for small firms. These are not huge numbers, but they are positive. That means tightening, on balance.

Now connect that to the Fed’s October 2025 survey wording: “modest net shares” tightened standards. Modest is the point. A credit turn rarely begins at “extreme.”

At the same time, the bond market is still signaling low stress. The high-yield spread at 2.79% on January 6, 2026 suggests investors are not demanding a big extra cushion for risk.

So we have a familiar split screen:

That split can last. It can also close fast if growth slows or profits disappoint. Credit is sensitive to confidence, because it is built on repayment.

There is also a second reason the quiet turn matters: it tends to show up in the real economy with a delay. Research using the loan officer survey finds that changes in reported standards can help explain later changes in credit and activity. That is not magic, and it is not perfect. But it fits what past cycles looked like in real time.

History does not give a single ending. It gives a range.

A quiet credit turn can stay quiet. Lending can tighten just enough to slow growth, without a “break.” That would look like softer hiring, slower investment, and fewer deals that rely on easy financing. The economy can bend without snapping.

But the same starting point can also make the system more fragile. If a new shock hits—something like weaker demand, a drop in collateral values, or a jump in uncertainty—tighter credit can amplify it. That is what 2007 taught. The tightening was real before the crash, and then it became part of the crash.

The key is not the headline number this quarter. It is the direction, and how long it lasts.

The credit cycle has a quiet gear. It turns before the loud gear does.

In 1990, 2001, and 2007, the early signs were not dramatic. They were small steps: tighter standards, wider spreads, tougher terms. Then, later, the slowdown became obvious in the data and in daily life.

That is the value of watching credit early. It reminds us that markets and economies have memory. And when borrowing gets harder—before anything breaks—it can still change what comes next.