Young adults, those 18 to 29, are starting to see the negative effect of missed student loan payments on their FICO credit scores.
The average score for Americans in their late teens and 20s fell three points to 676 in April, compared with the same month a year earlier, driven by struggles with resumed federal student loan payments, according to a report published this week by FICO, the creator of the widely used score. Scores can take years to recover. Roughly 14 percent of the young Americans saw a 50 point drop in their score — about double the figure from 2021, FICO said.
The year-over-year drop for members of Generation Z was the largest of any age group, FICO said. Roughly a third of younger consumers have student loans, the report noted, compared with 17 percent for the overall population.
A FICO score is a three-digit snapshot of a consumer’s credit history, ranging from 300 to 850. The minimum score considered to reflect “good” credit is 670.
Credit scores determine if you can get a credit card or borrow money to buy a home or a car and what interest rate you’ll pay. The higher the score, the lower the rate. Insurers use the scores to determine your premiums for car insurance and other types of coverage, and some landlords and employers use them as part of background checks.
The average score for all consumers was 715, down two points from last year. Scores are based on a variety of factors, including your payment history, the age of the loans and the mix of accounts you hold. Younger people, who have shorter credit histories, tend to have lower credit scores than the general population.
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The post Those Missed Student Loan Payments Are Messing Up Your Credit Score appeared first on New York Times.
