AI-Summary – News For Tomorrow
FICO reports the national average credit score dropped slightly to 715, with Gen Z experiencing the largest decrease (to 676) due to resumed student loan delinquency reporting affecting 34% of the generation. Experts attribute this to economic instability during their formative years. Despite this, Gen Z has the most potential for improvement. Monitoring your score is crucial for informed financial planning. Paying bills on time (35% of score calculation) and maintaining low credit utilization are key to building a good credit history. Experts recommend automated payments and avoiding new debt to improve your credit score.
News summary provided by Gemini AI.
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.
A credit score is a mathematical formula that helps lenders determine how likely you are to pay back a loan. Credit scores are based on your credit history and range from 300 to 850.
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.
“They’ve had so many different ongoing causes of economic instability that have really been with them as they’ve been growing up; those factors make it a lot harder for this generation to stay financially stable,” said Courtney Alev, consumer advocate at Credit Karma.
However, younger consumers also have the advantage of having the most potential for score improvement, Tommy Lee, senior director at FICO.
Don’t avoid knowing your score
It’s common to be afraid of checking your credit score, but it’s best not to avoid it, Alev said. Knowing your current score, whether it’s good or not great, can help you make a plan for the future.
“You need to know where you stand to be able to take action,” Alev said.
