Gen Z’s credit scores just suffered the biggest drop of any generation in years—student loans, rent and ‘doom spending’ are to blame

Core Insights - Gen Z is facing significant financial challenges as they await their share of the $124 trillion Great Wealth Transfer from baby boomers [1] - This year, Gen Z experienced the steepest annual drop in credit scores of any age group since 2020, with an average FICO score decrease of three points to 676, which is 39 points lower than the national average of 715 [2] - The decline in credit scores is indicative of broader issues in the credit market and reflects a generation struggling to achieve financial stability amid high inflation and rising interest rates [3][4] Financial Stability and Credit Market - Gen Z's financial fragility is described as structural rather than cyclical, facing unique challenges such as high inflation, digital credit, and social media-driven consumption pressures [4] - The current downturn in credit scores could have lasting consequences if spending and repayment habits do not improve, potentially leading to a long-term financial 'snowball' effect [4] Implications of Lower Credit Scores - A drop in credit scores can hinder Gen Z's ability to qualify for credit cards or loans, increase borrowing costs, and affect other financial opportunities such as car insurance and apartment applications [5] - This situation may trap young adults in a cycle of debt, limiting their potential to grow financially, including starting businesses or purchasing homes [5]