NEW YORK–Credit scores continue to fall 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, according to a new report.
The national average FICO score dropped by two points this year, the most since 2009, according to data released by FICO.
Although credit scores remain significantly higher than during the Great Recession, they are down for the second year in a row., CNN reported.
The FICO data found a growing share of borrowers are falling behind on car loans, credit cards and personal loans.
“Younger Americans, exposed to the double whammy of high student debt and low entry-level hiring, are under even more financial pressure.
Gen Z borrowers experienced an average credit score drop of three points — the biggest decline of any age group since 2020 during the pandemic, according to FICO,” CNN reported.
‘K-Shaped Economy’
“We’ve 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,” Tommy Lee, senior director at FICO, told CNN.
The Findings
Among the findings in the new FICO data:
- Delinquency rates on auto loans, credit cards and personal loans are at or near their highest levels since 2009. The delinquency rates are “more consistent with an economy in recession than one still in expansion,” FICO said, adding that mortgage and home equity loan delinquency rates are still near historic lows.
- FICO found that 14% of Gen Zers have had a large credit score decline of 50 points or more in the past year — more than any other year and double the decline of 2021.
- The restart of student loan payments is being felt by many, especially among Gen Z, where 34% have an open student loan. 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,” the FICO data show. “Another 1.9 million consumers haven’t had a delinquency reported even though they have student debt payments due and haven’t made payments.”
