The average U.S. FICO credit score has declined from 717 to 715 over the past year, marking its second straight annual drop, according to a new report. The two-point fall is the steepest annual decline observed since the Great Recession, highlighting a worsening trend in consumer credit health.
Credit analysts point to rising credit utilization and an uptick in delinquent accounts – particularly among student loans – as chief culprits. As federal relief programs have ended, previously paused debts are starting to weigh on borrowers’ credit profiles again.
Key Drivers Behind the Drop
Consumers are increasingly carrying higher balances on credit cards, pushing utilization rates upward. Since credit utilization is a major component of score calculations, using more of your available credit tends to erode scores even if payments remain timely.
Meanwhile, the return of student loan reporting has exposed many borrowers to delinquency records that were previously shielded. Young adults, especially those in Generation Z, have been hit hardest, as many face income constraints while resuming payments.
Lenders and credit agencies are also seeing more late payments across auto, personal, and medical loans. Even as mortgage delinquencies remain low, rising trouble in other loan categories is introducing drag on average scores.
What This Means for Borrowers and Markets
For many consumers, a small drop in score may not change loan eligibility, but it can affect interest rates or credit offers—especially for those already on the margin. Some borrowers may find credit harder or more expensive to access.
The worsening credit landscape looms as a warning for lenders and policymakers. If the trend accelerates, it may signal broader stress in household finances. Observers will watch upcoming job and income data to see if defaults continue rising.
As previously covered, the decline in credit scores reflects broader financial strain among consumers, particularly in a higher interest-rate environment and with the resumption of federal student loan collections.
