It's the Sharpest Credit Drop Since the Great Recession

From credit cards to student loans, Americans are missing payments—and their credit scores are paying the price. CNN reports credit scores are falling at the fastest pace since the Great Recession as borrowers struggle with high inflation, soaring interest rates, the return of student loan payments, and the sheer cost of everyday living. The national average FICO score slipped by 2 points this year—the sharpest drop since 2009—and it marks the second straight year of decline after nearly a decade of steady gains. "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," said Tommy Lee, a FICO senior director.

One major cause just returned: student loans. After the end of the COVID-era pause, millions of borrowers are now facing the resumption of repayment and, more importantly, the resumption of delinquency reporting. Between February and April alone, 6.1 million consumers had a student loan delinquency added to their credit file, sending the delinquency rate to a record 29% among those with payments due. Members of Gen Z, who are twice as likely as older adults to carry student debt, are being hit the hardest. Their average credit scores fell by 3 points this year, and 14% saw drops of 50 points or more. "My credit score took a drastic hit because I had to compromise and take a job where I'm severely underpaid," said 22-year-old Dimitri Tsolakis.

But the pressure is spreading well beyond young people. Roughly 1 in 5 Americans admitted to skipping or short-paying bills last year, while nearly half cut discretionary spending to stay afloat. Delinquencies on auto loans, credit cards, and personal loans are now at or near their highest levels since 2009—levels FICO described as "more consistent with an economy in recession than one still in expansion." But Reuters notes that a FICO report also struck a more cautious balance: "Overall, many consumers' credit health remains strong, as the average credit score of 715 is still near historical highs," the report said. "However, the average FICO score is a lagging indicator of credit health, and there are certainly many risks to the future average credit score."