Navigating the Downturn: Understanding the Current Credit Score Climate
A Historical Drop in Credit Scores
Recent analysis by FICO, a leading data analytics firm in credit scoring, reveals that the average credit score has fallen to 715 by April 2025. This two-point decrease from the previous year's 717 represents the fastest decline observed since 2009, when the average FICO score similarly dipped from 690 to 687. This historical context underscores the severity of the current economic challenges faced by consumers.
Unpacking the Reasons Behind Declining Creditworthiness
A primary factor contributing to this decline is the escalating rate of credit utilization, which measures the proportion of available credit that individuals are actively using. This ratio has steadily climbed since the COVID-19 pandemic, reaching 35.5% in April 2025, a notable increase from 29.6% in April 2021. The surge is linked to diminished personal savings, which were boosted by government aid and reduced spending during pandemic lockdowns, now forcing consumers to rely more heavily on credit.
The Impact of Increased Delinquencies
Another critical element in the deterioration of credit scores is the rise in delinquencies, largely propelled by student loan defaults. Severe delinquencies, defined as payments overdue by 90 days or more, have risen from 7.9% in April 2024 to 9.8% in April 2025. This increase directly correlates with the end of pandemic-era student loan relief measures.
The End of Student Loan Protections and Its Consequences
During the pandemic, the previous administration introduced a moratorium on federal student loan payments, halting payments and interest accrual. This pause was later extended, with an additional \"on-ramp\" period that allowed interest to accumulate but shielded borrowers from negative credit reporting for late or missed payments. This transitional phase concluded in September 2024, leading to student loan delinquencies appearing on credit reports starting in February 2025. FICO reports that 3.1% of individuals with FICO scores accumulated a student loan delinquency on their credit file between February and April 2025.
Generational Disparities: Gen Z Faces the Brunt
The younger demographic, particularly Gen Z, has been disproportionately affected by these credit score reductions. Being twice as likely to hold student loans compared to the general populace, Gen Z members have seen their average scores drop by three points year-over-year—the most significant decline among all age cohorts. This generation often lacks the financial cushions of savings, stock market gains, or home equity, making them more vulnerable to the dual pressures of inflation and higher interest rates.