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<\/p>\n Email Link<\/p>\n New York \n Credit scores are falling at the fastest pace since the Great Recession as Americans struggle to keep up with the high cost of living and the return of student debt payments.\n <\/p>\n \n The national average FICO score dropped by two points this year, the most since 2009, according to data released Tuesday by the analytics company.\n <\/p>\n \n Although credit scores remain significantly higher than during the Great Recession, they are down for the second year in a row.<\/a> FICO found a growing share of borrowers are falling behind on car loans, credit cards and personal loans.\n <\/p>\n \n Younger Americans, exposed to the double whammy of high student debt<\/a> and low entry-level hiring,<\/a> are under even more financial pressure.\n <\/p>\n \n Gen Z borrowers experienced an average credit score drop of three points \u2014 the biggest decline of any age group since 2020 during the pandemic, according to FICO.\n <\/p>\n \n The findings underscore the growing disconnect <\/a>between the euphoria on Wall Street and pessimism on Main Street. While US stocks continue to shatter record highs, a significant chunk of Americans say they are hurting.\n <\/p>\n \n \u201cWe\u2019ve seen a K-shaped economy where those with wealth tied to stock market portfolios and rising home values are doing well and others are struggling with high rates and affordability problems,\u201d Tommy Lee, senior director at FICO, told CNN.\n <\/p>\n \n Average credit scores fell sharply after the 2008 financial crisis, as unemployment skyrocketed and millions of Americans could not make their mortgage payments and defaulted on their auto loans.\n <\/p>\n \n Credit scores increased each year from 2013 to 2024, when they dropped by a single point, according to FICO.\n <\/p>\n \n But FICO found that delinquency rates on auto loans, credit cards and personal loans are at or near their highest levels since 2009.\n <\/p>\n \n These delinquency rates are \u201cmore consistent with an economy in recession than one still in expansion,\u201d FICO said, adding that mortgage and home equity loan delinquency rates are still near historic lows.\n <\/p>\n \n FICO found that 14% of Gen Zers have had a large credit score decline of 50 points or more in the past year \u2014 more than any other year and double the decline of 2021.\n <\/p>\n \n At least some of this pressure on younger Americans is linked to student debt.\n <\/p>\n \n Following a Covid-era pause, student loan delinquencies were not reported on credit files until February. The Department of Education restarted collecting federal student loans in default in May.\n <\/p>\n \n This shift disproportionately impacts Gen Zers because about one in three (34%) of them have open student loans, double the national at large, according to FICO.\n <\/p>\n \n Between February and April, 6.1 million consumers had a student loan delinquency added to their credit file, according to FICO. That means the student loan delinquency rate has climbed to a record high of 29% among the 21 million borrowers with a student debt payment due.\n <\/p>\n \n Another 1.9 million consumers haven\u2019t had a delinquency reported even though they have student debt payments due and haven\u2019t made payments.\n <\/p>\n \n The impact of these late student debt payments is amplified by the fact that Gen Zers often don\u2019t have the long history of making credit payments that feed into credit scores. That makes their credit scores vulnerable to more volatility, both up and down.\n <\/p>\n \n Another problem: Younger Americans are also contending with the most difficult job market in years for new college graduates.\n <\/p>\n \n Dimitri Tsolakis, 22, said he applied to hundreds of jobs after graduating from American University in 2024 with a degree in international relations.\n <\/p>\n \n It took Tsolakis 14 months to finally land a full-time job, or at least one that wasn\u2019t a scam. But the job he did get, as a secretary at a law firm in Orlando, called for a dramatic cut to his income relative to his prior work as a server.\n <\/p>\n \n \u201cMy credit score took a drastic hit because I had to compromise and take a job where I\u2019m severely underpaid,\u201d Tsolakis told CNN in a phone interview.\n <\/p>\n \n Tsolakis owes $35,000 in student debt but has had to pause repayments to focus on making his car payments and paying for other living expenses.\n <\/p>\n \n He\u2019s hardly alone in skipping payments.\n <\/p>\n \n About one in five (19%) of consumers say they paid less or skipped bills to get by in the past year, according to a July survey<\/a> by the Federal Reserve Bank of Philadelphia. That\u2019s up from 17% a year earlier<\/a>.\n <\/p>\n \n Even more consumers (47%) said they cut discretionary spending in the past year, while 23% said they reduced essential spending.\n <\/p>\n \n FICO found that 64% of Gen Z and 61% of Millennials with student loans rely on credit cards, buy-now-pay-later loans or personal loans to bridge financial gaps.\n <\/p>\n \n Sue Murphy, a nurse in Philadelphia, took a parent-PLUS loan to help fund her daughter\u2019s college education. The $70,000 in student debt requires monthly payments of just over $500.\n <\/p>\n \n To make ends meet, Murphy took on a second job, making her schedule 12 days on and one day off.\n <\/p>\n \n \u201cIt almost feels like it doesn\u2019t pay to be an honest hardworking citizen in this country anymore,\u201d Murphy said.\n <\/p>\n \n The plan had been to make 10 years of payments and then have the balance of the student debt forgiven because Murphy works at Temple Health in Philadelphia, a nonprofit medical system that qualifies for public service loan forgiveness.\n <\/p>\n \n However, Murphy now fears the student debt won\u2019t qualify for forgiveness because of rule changes proposed by the Trump administration.\n <\/p>\n
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