Credit scores are a core part of personal finance in the U.S. They determine Americans’ access to favorable loans and credit cards, and can even factor into applying for a job. Having good credit is especially relevant for young people, who can benefit the most from better loan terms and job opportunities as they make major financial decisions.

Without years of a good credit baseline, Generation Z is also the most likely to suffer the biggest drops when things go wrong.

Gen Z bears the brunt of falling credit scores

Credit scores are dipping for all Americans. The national average credit score fell to 714 in the second half of 2025, according to a report released Tuesday by FICO, an analytics company that produces the most widely used credit scoring model. It was a decline from the 715 average recorded in the first half of the year, and represented the lowest score since early 2020.

Last year already ranked as the worst for U.S. consumer credit quality since the 2008 financial crisis, FICO reported in September, when the agency found that 2025 delinquencies for auto loans, credit cards, and personal loans were at their highest level since 2009. To be sure, the trough in 2009 was nearly 30 points lower, at 686, and the score had climbed all the way to an all-time high of 718 in 2023 before the recent back-to-back declines.

But while most Americans dealt with only modest declines and remained in a “prime” borrowing position—considered to be within the high 600s and low 700s—it’s a different story for young people. While only around 10% of Americans overall saw their scores fall by 50 or more points between 2024 and 2025, that share jumped to 14.4% of people ages 18 to 29.

Many factors can contribute to a significant score downgrade, including a history of opening up multiple new credit lines. But one of the biggest reasons for Gen Z’s declining creditworthiness is that more young Americans are missing deadlines to make loan payments, specifically their student loan obligations, according to the FICO report.

More than 7 million student loan borrowers had a new credit delinquency reported last year, causing an average 62-point drop for those with missed payments. A decline that big from the national average shuts consumers out of prime borrowing status and the best loan terms. It might also bring many dangerously close to a low credit rating, potentially saddling young Americans with expensive interest rates, reducing employment opportunities, and further distancing Gen Z from homeownership.

Student loan delinquencies hit record highs

Student loan delinquencies have been on the rise ever since payments resumed in force at the end of 2024. A record 7.7 million borrowers had defaulted on $181 billion in federal student loans by the end of last year, in addition to 3 million other recipients who had missed payment deadlines by at least three months, according to the Department of Education.

These payments had been fully on pause between 2020 and 2023, part of the Biden administration’s pandemic relief efforts. Even after deadlines resumed, exemptions and follow-up relief shielded many borrowers from negative credit effects if they missed payments, but those measures have largely been wiped away since Donald Trump returned to office.

Earlier this month, a federal court ruled against Joe Biden’s signature affordable repayment program, meaning millions of borrowers who were enrolled in it will soon see the check come due.

Nearly 7.9 million student loan recipients had a delinquency in the first three quarters of 2025, according to a February report by the Century Foundation, a progressive think tank. The total number of delinquencies represented a quarter of all payments due, around triple the pre-pandemic delinquency rate. The report pinned most of the responsibility on the administration’s student loan actions, including a recent measure freezing thousands of applications for favorable payment plans linked to income level.

The Century Foundation’s report also tracked a large decline in borrowers’ credit scores. Around 2 million student loan borrowers who faced delinquency last year saw an average 100-point drop in their credit scores from 680 to 580, a below-average rating that makes good loan terms virtually inaccessible. Borrowers at that score level face apartment rental rejections—many landlords require 650 or higher just to apply—and are effectively locked out of homeownership: Just 1.2% of mortgages in 2024 went to borrowers with scores below 580.

The long-term ramifications of this mass downgrading are significant. Negative credit information typically remains on a report for seven years, meaning a generation of young workers may be barred from securing housing, passing employment credit checks, or obtaining affordable personal loans for nearly a decade. An analysis earlier this year found that student loan defaults now occur every nine seconds, a rate that could cast a pall on Gen Z’s hopes for economic mobility well into the 2030s.