Given that there's no network enforced punishment for defaulting, outwith the pre-agreed upon credit offer terms, the default assumption is that they will default.
AFAIK the reference UI does not offer the ability to auto repay the credit offer, unlike say the bitshares astro ui, so if they forget then they will default.
The static pre-determined collateral ratios certainly are vulnerable in even moderately volatile periods.
And I tend to agree, many borrowers are looking to take out more than they put in to the credit system. Borrowing and backing loans with LP tokens - that are continuously growing - might help tilt the calculus in favor of repayment.
Good call on the auto-repay function. Seems prudent to enable automatic payment right before expiration so borrower gets the maximum value for the credit fee.