^{Source: Fortune}

The Credit Score Decline: What’s Happening?

For the first time in over a decade, the average American credit score is heading in the wrong direction. According to a new report from FICO, the national average credit score fell to 715 in 2025, down from 717 the previous year. Though this may seem like a minor dip, it reflects growing financial pressure across the country — especially among student loan borrowers.

FICO scores range from 300 to 850 and are used by most lenders to assess risk when issuing credit cards, mortgages, car loans, and more. Scores above 670 are considered good, while anything over 740 is very good. But as inflation, higher interest rates, and rising consumer debt chip away at financial stability, millions of Americans are now struggling to keep up.

Why Are Credit Scores Falling?

The report attributes the decline in scores to several key factors:

• Rising delinquencies: The percentage of consumers falling 90 days or more behind on payments is now higher than it was before the pandemic.
• Climbing debt levels: Total household debt reached a record $17.5 trillion in Q4 2024, according to the Federal Reserve Bank of New York.
• Resumption of student loan reporting: For the first time since March 2020, missed student loan payments are being reported again — and it's having a major impact.

According to Tommy Lee, Senior Director at FICO, “The reintroduction of student loan delinquency data to credit reports is a major driver behind the uptick in severe delinquencies.”

Student Loans Are a Growing Burden

During the pandemic, federal student loan payments were paused, and borrowers in delinquency were marked as current. That pause ended on September 30, 2024 — and now, the reality is sinking in.

A March 2025 report from the Federal Reserve Bank of New York warned that over 9 million student loan borrowers are at risk of seeing "substantial declines" in their credit scores by the end of Q1 2025. The median credit score for student loan holders had jumped 11 points during the pandemic relief period, but that gain is now being reversed.

And the effects aren’t temporary. Even if a borrower eventually catches up on their payments, that late payment can stay on their credit report for up to seven years.

Why a Lower Credit Score Hurts

A drop of just a few points can make a big difference in your financial life.

Lenders use credit scores to determine:

• Whether to approve you for a loan
• The interest rate they’ll offer you
• The credit limit they’re willing to extend

According to a LendingTree analysis, improving your credit score from “fair” (580-669) to “very good” (740-799) could save you more than $39,000 over a lifetime, mostly through better mortgage and loan rates.

If your credit score is below 670, you may be viewed as a higher-risk borrower. This could lead to:

• Higher mortgage and auto loan rates
• Lower credit limits or denial of new credit
• Difficulty renting apartments or qualifying for jobs that require credit checks

A Look Back: Credit Score Trends Since 2008

This is not the first time Americans have faced a widespread credit score drop:

• During the 2007-2010 housing crisis, the national average credit score fell to 686, driven by mortgage defaults and foreclosures.
• In contrast, during the pandemic, a combination of stimulus payments, loan forbearance, and reduced spending helped boost credit scores to a historic high of 718 in 2023.

But that streak ended in 2024, with FICO reporting the first national score drop in more than ten years. The trend has only continued into 2025, with a sharper fall driven by student debt and rising delinquencies.

Who’s Managing Well — And Who Isn’t?

Despite the overall decline, many Americans are still keeping their finances on track. “There are still many consumers that are managing their payments very well,” said FICO’s Tommy Lee. But the data shows a growing divide — those who are falling behind are doing so more significantly than before.

What Can You Do to Protect Your Credit?

Improving or maintaining your credit score in this environment requires vigilance. Experts recommend:

• Paying all bills on time, even if it’s just the minimum payment
• Keeping credit utilization below 30% of your available credit
• Avoiding unnecessary new credit inquiries
• Monitoring your credit report for errors or fraud

Final Thoughts

As the economy continues to adjust post-pandemic, consumers are feeling the pressure of resumed student loan payments, rising interest rates, and growing debt. The result? Credit scores are slipping — and student loan delinquencies are leading the charge.

Staying informed and proactive with your finances is more important than ever. Because in today’s economy, even a few points on your credit score can mean thousands of dollars lost — or saved.

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