Student borrowers can see their credit score drop due to late loan payments
According to the Federal Reserve, around 9.7 million student loan borrowers will see a decline in their credit scores.
Straight Arrow News
According to FICO, credit scores have fallen nationwide, reflecting the struggles that Americans have financially floating around.
The national FICO score used to summarise credit reports, or triple-digit numbers, fell two points to 715 from last year, the credit scoring service company said it was the first FICO score in the FICO Score Credit Insights report. The decline was driven by spikes who missed payments due to increased credit card usage and the resumption of student loan delinquency reports, FICO said.
Many consumers have relied more strongly on credit cards to achieve interactions, increasing the average credit card usage rate in 2025 to 35.5% from 29.6% in 2021.
A decline in FICO scores can be of concern as lenders decide whether to use them to approve loans and credit cards, as well as interest rates and credit limits. Scores range from 300 to 850, with higher scores indicating lower risk to lenders, lower scores, and higher risk.
A new report from FICO “showns how consumers are adapting — whether they are essential payments such as car loans, reverting to student loan obligations, or actively monitoring their credit health,” said Julie May, FICO’s Vice President and General Manager of B2B Score.
Who is the worst?
Generation Z (ages 18-29) saw the biggest decline in average FICO scores for age groups, which fell three percentage points from the previous year, FICO said.
They also said they had a point swing of 50 or more on FICO scores than the national average, reflecting greater financial volatility. Much of that volatility is likely due to student loan debt, FICO said. 34% of young consumers hold student loans, compared to just 17% of the total population.
Where is the middle?
Many Americans also continue to leave the middle of the FICO score range (approximately 600-749), data show. The Middle FICO scoreholder has fallen from 38.1% in 2021 to 33.8% of this year’s population.
However, FICO pointed out that all these people didn’t drop to lower their scores. Instead, consumers moved to both the highest and lowest score brackets “reflecting the K-shaped recovery.”
The K-shaped recovery is uneven economic improvement, with some people continuing to fall and fight while others are rising.
How do Americans deal with it?
The struggling Americans are falling into ri and paying attention to their credit scores, FICO data shows. Over half (55%) of Americans have checked their credit scores at least once in the past year, saying it has increased from 49% in 2024.
Consumers are currently 19% more likely to pay car loans than mortgages, placing cars at the top of the payment tier. A mortgage is 56% more likely to be paid than a personal loan, and 64% more likely to be paid than a bank card.
Paying back your student loans is a top priority for everyone. It is the lowest “even among high-scoring borrowers,” Fico noted.
Tommy Lee, senior director of predictive scores and analytics at FICO, said:
Medora Lee is a money, market and personal finance reporter for USA Today. You can contact her at mjlee@usatoday.com and subscribe to our free daily money newsletter for personal finance tips and business news every Monday to Friday morning.
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