National credit score drop signals growing affordability issues, including on Long Island

Gen Z's credit scores have dropped more than those of any other generation in the past year, driven largely by student loan debt, according to a recent report, making it more difficult for the younger demographic to gain a foothold on an increasingly unaffordable Long Island.

Around a third of Gen Z borrowers — those between 18 and 29 — have student loans, compared with 17% of the broader population, according to the report from credit scoring company FICO released Sept. 16. The demographic, with an average three-point decrease, also saw the largest credit score decline for any age group since 2020.

Credit scores are a prediction of how likely a borrower is to repay debt on time and are commonly referenced by U.S. lenders when assessing potential loans, such as mortgages and auto financing. The national drop to an average score of 715 was driven by rising credit card use and an increase in missed payments, according to the report, which specifically referenced FICO scores. The average FICO score in New York was 722, higher than the national average. Long Island-specific data was not available. 

Declining credit scores indicate a slowing economy, said John Rizzo, an economist at Stony Brook University, attributing the downtrend to uncertain economic policies on the part of the current administration, along with high interest rates and price increases caused by tariffs.

Those factors combined have made it “harder to purchase things" for many Long Island consumers, he said, “and it’s harder to pay off your debt when the interest rates are high, so people miss payments and that’s when their FICO goes down.” 

Gen Z borrowers struggling to maintain good credit scores may especially struggle to purchase cars and homes, something that's already difficult on Long Island, where homes regularly sell for record-breaking prices, he said. 

The decline in the average score was also likely due to the impact of "resuming student loan delinquency reporting," said Tommy Lee, senior director at FICO, in an email. 

New federal student loan delinquencies have been reported on credit files since February for the first time since March 2020, according to the report, and since then, the student loan delinquency rate has been at record highs, with 3.1% of borrowers seeing a delinquency added to their credit file between February and April. 

The decline in average score fits “the anticipated effects of resuming student loan delinquency reporting,” Lee said, but the company analysis shows delinquency rates overall — on auto loans, credit cards and personal loans — are at or near their highest levels since 2009, during the Great Recession. 

Gen Z leads credit score downswing

Gen Z consumers are most likely to hold student loans and led the downswing in credit scores with an average score of 676. But it's more normal for Gen Z borrowers to have lower scores, because many are early in their credit score journey, with less time to build savings and investments, Lee said.

“Instead, they are more likely to have affordability issues and more likely to face the impacts of higher interest rates and inflation,” he said.

Economic uncertainty, fueled by changing tariff policies, have led many businesses to hold back on hiring and investing, Rizzo said. “That’s the other part of the problem. People aren’t getting hired.”

“The economy is stagnating,” Rizzo said, leading people to run up credit cards and miss payments as the United States heads toward “stagflation, a situation where you have inflation rising and economic growth stagnating” that’s difficult to escape.

“In real time, it means that I have difficulty getting a job, I’m at risk of losing my job, yet I’m paying higher prices, running up my credit cards and missing payments, and it’s just a bad situation overall,” he said.

In a survey published with the FICO report — conducted by The Harris Poll, a global market research and consulting firm — nearly half of Gen Z survey respondents said they relied on credit cards or buy now, pay later loans to make up for job losses or income reduction in the past year. That number is higher among student loan borrowers. 

Across age groups, Americans increasingly relied on credit to stay afloat, with 24% opening a new credit card this year and 13% opening a personal loan as a financial cushion, the survey said. Nearly a third said they relied on credit cards to make ends meet after disruptions to their job or income over the past year.

Paying auto loans was the top priority for most consumers, followed by mortgages, personal loans and bank cards, FICO said, while student loans were least likely to be prioritized.

Household debt has increased by $4.24 trillion since the end of 2019, according to a recent report from the Federal Reserve Bank of New York, with balances increasing on mortgages, home equity lines of credit, credit cards and auto loans in the second quarter of 2025. 

Student loans specifically increased by $7 billion between April and June this year, the report said, with 10.2% of aggregate student debt reported as more than 90 days delinquent.

In the first quarter of 2025, more than 2.2 million newly delinquent student loan borrowers saw their credit scores drop more than 100 points, and more than 1 million saw their scores drop more than 150 points, according to the New York Federal Reserve.

Scores remain dynamic, experts say

Nearly three-quarters of consumers said they checked their credit scores multiple times a year, reflecting strong credit awareness, the FICO report said.

“The good news is that FICO scores are dynamic — they change based on the credit behavior of the consumer. Paying loans on time and as agreed will positively influence someone’s credit score,” Lee said.

The report also noted that more consumers moved to either the highest or lowest FICO credit score brackets with fewer in the middle, which dropped from 38.1% of the population in 2021 to 33.8% in 2025.

The phenomenon, called a “K-shaped economy,” has financially strained some borrowers impacted by higher costs and interest rates, while other borrowers have benefited from appreciating stock market portfolios and home prices, the report said.

Lee said those with stronger credit scores likely maintained healthy financial habits, such as careful budgeting and debt management, even in the face of high prices and interest.

“Consumers with stable cash flows and safety nets” via more savings or available revolving credit, however, “may have been better positioned to manage their finances,” he said.

Also, average scores in the low 700s are indicative that “many consumers’ credit health remains strong,” Lee added, pointing out that the new average credit score is only three points lower than an "all-time high of 718 in April 2023.”

The percentage of consumers with a delinquency over the past year — 19.7% — was also the same in April as it was pre-pandemic, in April 2019, he said, noting that credit scores overall increased during the pandemic and remain higher thanks to government stimulus checks and pay increases.

Maintaining credit scores

For those whose credit scores did drop, it could make it harder or more expensive in the short term to open lines of credits or take out loans, such as a mortgage, said Ross Natoli, a senior financial adviser at Joel Isaacson & Co. in Manhattan. 

“Depending on the size of the drop, it could either disqualify people from even getting a line of credit, whether that’s for renting an apartment, buying a home or getting a car,” he said.

What's more, it could take years for borrowers to repair credit scores, said Casey Mauldin, chief revenue officer and chief lending officer at Jovia Financial Credit Union, based in Westbury. 

"When you have something like a decrease in your credit score, even if it's a few points, that could impact your interest rates on other products and your ability to borrow," Mauldin said. 

There are a few ways to improve credit scores, Natoli said, including asking for increases on existing lines of credit. Consumers should also avoid canceling existing cards, use credit sparingly and avoid missing payments.

Also, “build healthy credit early,” he said. “One of the biggest issues people have in terms of FICO scores and credit scores is not having them at all, and not having any history of credit at all.”

One way to start building credit would be to open a card and pay it off each month, he said, a tip that’s applicable even for teenagers.

For some Long Island residents, like Rocio Castillo, of Deer Park, a key strategy to managing credit scores has been budgeting.

“Sometimes you try to avoid to continue shopping,” said the 33-year-old, adding she tries to avoid impulse buys.

Tasfiya Haque, 22, a nurse and Deer Park resident, also admitted to some concern about keeping her credit score up, especially with higher living costs on Long Island.

“I try to save my money,” she said, “and I also try to work overtime to pay my [bills].”

But Mike Ruben, of Selden, another Gen Z consumer, said he isn’t too concerned about his credit score.

“I’m not really looking for a home loan or a car,” he said, “but I’ll keep my eye on it.”