Discrepancies in default rate reporting for private credit have created a transparency challenge for investors. While managers report default rates of 1–2%, rating agencies like Fitch Ratings estimate the figure at 6.3% as of August 2026. This gap stems from varying definitions of default and a lack of standardized reporting in the private credit market.
Fitch reported 14 default events in August 2026, involving 11 unique borrowers and 3 repeat offenders. The healthcare and industrial sectors are particularly affected, with default rates near 9.9%. In contrast, the Proskauer Private Credit Default Index recorded a 2.51% rate for Q2 2026, covering a portfolio of 716 loans totaling $195.6 billion in principal.
Data from Houlihan Lokey for Q2 2026 also indicates a 2.5% default rate by borrower count. Stress is concentrated among smaller companies with EBITDA below $20–25 million, where approximately 12% of borrowers were trading below 90 cents on the dollar. Methodology differences, such as the treatment of extended maturities and PIK conversions, contribute to the reporting variance.
Investors face difficulties comparing fund performance due to these inconsistent methodologies. Because private credit agreements are negotiated bilaterally, managers may classify restructurings differently than rating agencies. Experts advise institutional investors to verify specific default definitions used by their managers to better assess risk.
