As Gen Z's credit scores fall, some valuable advice

New habits can help those in trouble. Student loan debt is the main culprit.

- BY ADRIANA MORGA

PAYING on time is a critical credit score factor. Automatic payments, even of the minimum amount, can help.

(Mark Humphrey Associated Press)

Gen Z has seen its credit scores drop more than any other generation over the last year, largely because of student loan debt, according to a report out last week.

The total national average credit score dropped two points this year to 715, according to the report from credit scoring company FICO. But Gen Z's average score dropped three points to 676, the largest year-over-year decrease among any age group since 2020.

A credit score is a mathematical formula that helps lenders determine how likely you are to pay back a loan. Credit scores are based on your credit history and range from 300 to 850.

The report found that 34% of Gen Z consumers have open student loans, compared with 17% of the total population, and the decline in credit scores is primarily due to the resumption of student loan delinquency reporting.

The U.S. Department of Education paused federal student loan payments in March 2020, offering borrowers relief during the economic chaos of the COVID-19 pandemic.