Falling Credit Scores for Younger Americans
Based on the Fall 2025 FICO Credit Insights Report and other data, credit scores for younger Americans are falling due to economic pressures and unique generational challenges. Gen Z (ages 18–29) experienced the largest average drop, declining by three points.
Here’s a breakdown of why scores are falling for younger Americans:
Economic and Financial Headwinds
- Persistent inflation and high interest rates: Younger Americans have had less time to build savings or benefit from rising asset values like stocks and homes. Elevated living costs, combined with higher credit card and loan interest rates, strain budgets and reduce debt repayment ability.
- Record credit card balances: Younger generations often rely on credit to cover expenses. According to the report, 64% of Gen Z and 61% of Millennials with student loans use credit cards or other loans to make ends meet. High credit utilization negatively impacts credit scores.
- Stagnant wages for entry-level jobs: Recent graduates face low entry-level wages that have not kept pace with inflation, making debt management more challenging.
Unique Generational Struggles
- Return of student loan payments: Following the end of COVID-era forbearance, many young borrowers resumed student loan payments in 2024, with reporting of missed payments starting in early 2025. Gen Z is disproportionately affected, with 34% holding student loan balances—more than double the overall population.
- Limited credit history: Shorter credit histories make scores more volatile. Late payments have a larger negative impact on younger consumers with shorter credit files.
- Financial knowledge gap: FICO’s survey found younger generations often lack knowledge of how to access their scores or improve them, leading to mistakes that harm credit.
- "Doomspending": Financial anxiety may drive impulsive spending among younger adults, further straining finances.
Broader Economic Context
The financial stress on younger Americans is part of a larger "K-shaped" economic pattern. Some individuals, especially those with wealth tied to stocks, are thriving, while others struggle with affordability. Rising delinquency rates among younger borrowers are a warning for the broader credit market.
The FICO Credit Insights report highlights that Gen Z’s credit scores are more volatile than other generations. While some young consumers saw increases of 50 or more points, an even higher percentage experienced drops of 50 or more points, reflecting the generational challenges and economic pressures they face.
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