Why your credit score might be slipping even if you’re doing everything right

The K-shaped economy strikes again.

A new report from the Fair Isaac Corp. (FICO), creator of the credit score most lenders use, shows that the average American’s FICO score is now down to 714—a two-point decline over the course of the last year. 

The current slide in U.S. credit scores began in 2023, when the government ended the temporary pandemic-era freeze on student loan collection. Missed mortgage payments have also ticked up some, contributing to the slide in credit scores. Prior to the latest report, the average American’s credit score had already dropped to 715 between 2024 and 2025, which at the time was the most dramatic decline in scores since the Great Recession took its toll on American borrowers in 2009.

There is one bright spot in FICO’s latest report, but like all things in the U.S. economy right now, it’s a mixed bag: The share of Americans with credit scores of 750 and up now sits at 48%—up from just 43% in 2019. The bad news is that the middle has dropped out, as both the high score and low score segments of the credit spectrum are growing.

Haunted by the K-shaped economy

That story is familiar across the American economy right now. People on the lower-income rungs are fighting to keep their heads above water, even as high earners enjoy growing wealth powered by stock market gains. That bifurcation of the American economic experience is known as the K-shaped economy, a term that reflects the wealth gap between the rich and poor—and the growing wealth gap between them.

The most obvious engine powering that discrepancy is inflation: Everyone is paying more for everything. But while the rich can absorb the cost, rising prices take a disproportionate bite out of a lower earner’s monthly budget. Higher earners can also lean on their investments, which may dip here and there, but have continued on an upward trajectory since 2020.

All of these trends are sure to have a lasting impact on the earning potential of Gen Z. The new FICO report shows that over a quarter of Gen Z consumers with a credit history opened at least one credit card over the last year, the highest rate of any age group—followed closely by borrowers between the ages of 30 and 59. Gen Zers also saw the biggest credit score decrease on FICO’s last big report, dropping three points in 2025—the largest drop for any age group since 2020. That decline was spurred by resumed student loan delinquency reporting: While only 17% of the broader U.S. population is still paying down a student loan, more than twice as many members of Gen Z carry student loans.

“While the average FICO score remains near historical highs at 714, lower-scoring consumers have shown they are more likely to be impacted by higher interest rates, higher prices caused by inflation, and affordability challenges,” the FICO report states, noting the rise in borrowers with high credit scores. “While uncertainty persists for some segments, the economy could benefit others.”