Why credit scores are falling, and what it means for consumers

• Americans’ average credit scores dipped to 715 in 2025, reflecting a two-point decline from the previous year.
• Resumption of student loan collections in 2025 is significantly impacting younger consumers, with Gen Z experiencing the largest drop in credit scores.
• Auto loans are now the top priority for payments, surpassing mortgages, as consumers reorder their financial obligations.
• The middle range of credit scores has shrunk, while more consumers are moving into both the highest and lowest score brackets.
• Nearly half of Gen Z and Millennials check their credit scores monthly, indicating increased interest in financial health.

Americans’ average credit scores dipped moderately by two points to 715 in 2025, signaling shifts in consumer financial behavior and economic pressures. Despite the modest decline, the national average remains in the “good” credit score category. This new benchmark from the FICO Score Credit Insights report, released by Fair Isaac Corp. (FICO), paints a picture of an economy where rising inflation, increased delinquency rates and the resumption of student loan debt collections are putting financial stress on individuals. While credit scores are still strong, it is the younger generation that is feeling the squeeze the most.

Generation Z faces unique challenges

The report highlights that Gen Z, aged 18 to 29, is grappling with a significant three-point average credit score decline compared to the previous year. Gen Zers, with a higher rate of student loan debt and struggling under the burden of rising inflation, are not as financially resilient as their older counterparts. This demographic holds 34% of student loans, nearly double the 17% held by the general population. Student loan debt is just one factor; affordability issues, higher interest rates and a lack of savings buffers have further contributed to financial volatility in this age group.

Shift in payment priorities

One of the most interesting findings in the report is the evolution of the payment hierarchy. Auto loans now sit atop the priority list, with a 19 percent rise in consumers paying these over mortgages. This shift signals a reordering of financial priorities as consumers seek to protect what they perceive as essential assets, such as cars, ahead of other loan obligations. Mortgage delinquencies, although up 58 percent from 2021, still sit below pre-pandemic levels, suggesting that home ownership remains a bedrock of financial security. However, student loans rank last in payment importance, largely due to the effects of forbearance and deferral measures that were in place during the early stages of the pandemic.

K-shaped economic recovery

The report also highlights a K-shaped economic recovery, where the middle score range (600–749) has shrunk from 38.1% of the population in 2021 to 33.8% in 2025. Meanwhile, more consumers have moved into both the highest and lowest score brackets. This widening gap is indicative of an economy where the monetary benefits and burdens are unevenly distributed. Consumers with higher credit scores have benefited from strong stock market performance and rising home values, while those with lower scores have struggled under the weight of inflation and high interest rates.

Empowering consumers with credit education

The FICO report underscores the need for increased credit education and awareness. Nearly 71% of Americans say they check their credit scores multiple times per year, with 55 percent checking at least once in the past year. This trend is particularly strong among younger consumers: 46 percent of Gen Z and 45 percent of Millennials say they monitor their scores monthly. This heightened awareness can be a powerful tool in fostering better financial decisions and building resilience against future economic downturns.

Concluding reflections on financial health and inequality

As the economy continues to navigate the post-pandemic era, the findings from the FICO report offer both a snapshot and a roadmap for improvement. The challenges faced by younger consumers, particularly those burdened by student loan debt, emphasize the need for systemic changes to address inequality and financial instability. Policymakers, lenders and financial educators must work together to provide resources and strategies that enhance financial literacy and protect consumers. The road to recovery may be long, but with increased transparency, awareness and support, Americans can find their footing in a more resilient financial landscape.

Balancing financial obligations and building resilience

The resumption of student loan debt collections and rising delinquencies on various loan types reflect a complex economic environment where Americans are adapting their financial behaviors. By prioritizing essential payments like auto loans, navigating the return of student loan obligations and actively monitoring their credit health, consumers are finding ways to protect their financial futures. As we look ahead to future challenges, it’s clear that building resilience and transparency will be key in fostering a more equitable and financially secure society.

Sources for this article include:

TheEpochTimes.com

Investors.FICO.com

ed.gov