Credit ratings are falling again at a rapid pace, marking the sharpest decline since the Great Recession, amid rising living costs and the resumption of student loan repayments.

The average FICO score in the United States fell by two points this year – the largest drop since 2009, according to analysts.

Although creditworthiness remains above pre-crisis values, the downward trend has continued for the second year in a row. FICO notes an increasing share of borrowers with delinquencies on auto loans, credit cards, and personal loans.

Younger generations are feeling a double squeeze: high student loan debt combined with weak entry-level opportunities in the labor market.

Generation Z has experienced an average credit score decline of three points – the largest among all age groups since 2020, when the pandemic began.

Key takeaways for families and lenders

These data highlight the shift between optimism in financial markets and the real difficulties people face in daily life. While stock indices continue to rise, a significant portion of the population feels financial pressure.

“We are seeing an economy with a K-shaped curve, where those with wealth in stock market portfolios and rising home values are thriving, while others face high rates and affordability challenges.”

– Tommy Lee, CNN

According to FICO, delinquency rates on auto loans, credit cards, and personal loans are approaching or at their highest levels since 2009.

14% of Gen Z have experienced a significant drop in their credit score by 50 points or more in the last year – the highest figure among all periods and twice that of 2021.

After a COVID-19-related pause, student loan delinquencies were not recorded in credit files until February. The Department of Education resumed federal student loan collections in May.

According to FICO, about 34% of Gen Z have outstanding student loans – this is well above the national average, intensifying financial pressure on young people.

“My credit score plummeted sharply because I had to compromise and take a job that pays very little.”

– CNN

In the long run, this means lenders and policymakers must account for elevated risks and develop solutions to support borrowers during the slow economic recovery.