Why Gen Z's credit scores are dropping-and what to do if yours is too

"Gen Z has seen its credit scores drop more than any other generation over the past year, largely because of student loan debt, according to a new report out this week. The total national average credit score dropped two points this year to 715, according to the report from credit scoring company FICO. But Gen Z's average score dropped three points to 676, the largest year-over-year decrease among any age group since 2020."

"The report found that 34% of Gen Z consumers have open student loans, compared to 17% of the total population, and the decline in credit scores is primarily due to the resumption of student loan delinquency reporting. The U.S. Department of Education paused federal student loan payments in March 2020, offering borrowers relief during the economic chaos of the coronavirus pandemic. Though payments were set to resume in 2023, the Biden administration provided a one-year grace period that ended in October 2024."

Gen Z's average credit score dropped three points to 676, the largest year-over-year decrease among age groups since 2020. The total national average credit score fell two points to 715. Thirty-four percent of Gen Z consumers have open student loans, compared with 17% of the total population, and the decline stems primarily from the resumption of student loan delinquency reporting. Federal student loan payments were paused in March 2020 and a one-year grace period ended in October 2024. Collections resumed this summer with potential wage garnishment for roughly 5.3 million borrowers in default. Combined with a tight job market and high inflation, young consumers are struggling to make on-time payments, and lower credit scores increase costs and barriers to mortgages, car loans, credit cards, and insurance.

Read at Fast Company