Gen Z Leads Biggest Drop In FICO Scores Since Financial Crisis
- Reference: 0179331462
- News link: https://news.slashdot.org/story/25/09/17/2142221/gen-z-leads-biggest-drop-in-fico-scores-since-financial-crisis
- Source link:
> Gen Z borrowers took the biggest hit of any age group this year, helping pull overall credit scores lower in the worst year for US consumer credit quality since the global financial crisis roiled the world's economy. The average FICO score [1]slipped to 715 in April from 717 a year earlier , marking the second consecutive year-over-year drop, according to a report released Tuesday by Fair Isaac Corp. The average score dropped three points to 687 in 2009.
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> Gen Z borrowers saw the largest drop, not only this year, but of any age group since 2020, with their average score falling three points to 676, the Montana-based creator of the FICO credit score said. FICO scores are a measure of consumer credit risk and are frequently used by US banks to assess whether to provide loans. The scores typically range from 300 to 850. The credit scoring agency attributed the recent overall drop to higher rates of utilization and delinquency, including the resumption of reporting student loan delinquencies -- a category that hit a record high of 3.1% of the entire scorable population. [...] While the overall average score dropped, the median FICO score continued to rise to 745 from 744 a year ago, indicating that a large drop in scores at the low end dragged down the average.
[1] https://finance.yahoo.com/news/gen-z-leads-biggest-drop-173103250.html
Makes sense (Score:1)
Gen z have lower average debt balances , are much less mortgage and auto loan debt and tends to be more debt-averse none of which helps you establish credit rating.
Just considering the FEW Gen Z that HAVE loans (Score:2)
The average for the entire Gen Z seems to be closer to 0.
Down 2 points? And Gen Z down 3 points? (Score:3)
My own FICO score varies by +/- 10 points on a monthly basis. What am I missing? Why is a 2-point or 3-point drop news?
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better call up those statisticians and tell them they totally dropped the ball on filtering their datasets for noise over time. then theyll slap their heads and say "of course, this guy is so smart why didnt we think of that!"
then the other guy pops up and says "hey boss is there any point to tracking changes over very large groups over very long time periods"? then theyll say "this guy doesnt seem to think so" and pack up and shut it all down
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> My own FICO score varies by +/- 10 points on a monthly basis. What am I missing? Why is a 2-point or 3-point drop news?
Because the drop is for the average of the entire Gen Z population. Furthermore, the average has been trending down for several years.
Sensationism at its finest (Score:5, Informative)
So the actual median and modal scores hardly moved. The explanation given Zs credit use trends is well known and it is the 'reporting' of student loan delinquency.
So really Zs overall credit worthiness has not changed much it is just the scoring algorithm is producing a slightly different result because a federal policy changes in how unpaid student loans are classified/reported.
Bingo (Score:2)
A substantial amount of the actual work of "journalism" these days is hiding the actual informational payload behind someone's pet bias.
Which sometimes leads to a problem deciding which bias to emphasize, but that's why they're the professionals.
"If you slice up humanity into arbitrarily delineated categories like this , number go down."
"Interesting, which arbitrarily delineated category?"
"Youngins."
"Ah, so they're lazy fuckups, not maltreated but noble boomers."
and no doubt (Score:3)
Gen [ will have an even lower credit score
(I think [ is the next character after z)
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Those two un-closed brackets make the programming side of my brain hurt.
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Wait until you discover LISP!
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You memorized the ASCII Table? You must be a boomer, you poor, obsolete fool... (I had to google it. Yes, [ is the ASCII character after Z.)
Damn kids, get off my brass. (Score:1)
Who to blame? :
Gen Z'ers borrowing too much ? Or the boomers lending to them ?
Mine is 666 (Score:2)
is that significant?
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Yes, Satan my reposes your car or home.
FICO/credit scores (Score:2)
Until you want to get more credit, your scores are irrelevant. Now yes it does take time to build your score back up and yes you should know why your credit score is crappy but people get to consumed with it. I see to many people posting how to remove bad credit from your reports, US has made it easy for some credit types to be removed, but your score is your score and how much you can borrow is how much you can afford to pay back. There was an ad on late night TV offer loans, Some indian reservation offe
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FYI: Many auto insurance providers now ask for a credit check.
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Many employers use credit scores as part of their background checking. A low score could get you rejected on the theory that if you are bad at managing your own money you may be bad with the company's money.
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> ...but your score is your score and how much you can borrow is how much you can afford to pay back.
The score is supposed to reflect ones ability to pay back the loan though and when ones score drops despite having ample payment history because one isn't using their credit enough it strongly suggests that the intentions behind the score are not honest as if anything the person with less debt should be seen as more reliable.
Teachers (Score:2)
Last year my son's high school economics teacher told her class to put a balance on their first credit card and make minimum payments on it to build credit, which is 100% incorrect. Financial literacy is a problem in this country.
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I've had credit card companies cancel my card for never charging anything on it. If you don't carry a balance, they don't make any money.
I'd like to pick on Gen X... but I cannot. (Score:2)
Got my first credit card in 1988. I was in credit debt until 2002 when it all collapsed, after years of using one card to pay off another, and being caught in payday loans. I experienced the stress of having the phone ring several times a day and knowing it was debt collectors on the other end. Had to declare "not bankruptcy", or what in Canada was a consumer proposal. My credit score bottomed out well under 676. 2004, all bills paid. I was at square 0 again. Started to rebuild my credit.
Fast forward to tod
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Gen Z... not Gen X. I'm Gen X.
I'm not seeing the problem (Score:2)
My FICO score is 847 out of 850.... oh, wait... I'm a boomer. Nevermind!
fake it till you make it (Score:2)
Millenials had fake it till you make it. Genz has fake it forever
Student Loan Feudalism (Score:2)
Looks like the biggest drop is from reporting student loan delinquencies. Biden's effort to reduce student loan debt has ended.
Instead of free/low cost education like much of the rest of the "civilized" world, the US puts everyone in perpetual penury with massive student loan debt so they have to keep slaving for much of their lives.
Credit Scores are debt (Score:2)
Your Credit Score reflects upon how much debt you have.
If you have no debt and not making regular payments to something your credit score WILL go down. It's a fact. We paid off all our debt have not regular payments for things like streaming subscriptions etc. And our Credit Scores started going down. The suggestion - add a subscription that you pay on and your Credit Score will go up.
Credit Scores are nothing more than trying to keep people IN DEBT! The Credit agencies need to go away - they are ther
Credit scores are not what you think they are (Score:2)
Credit scores don't reflect how well you are doing. Their purpose is to tell lenders how well they can milk you. It's an indicator of how exploitable you are and many people out there completely miss this fact.
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> ok whats your score, are you living as your true self with a score in the 600s
My score was 790 a year ago. I faithfully have made my student loan payments, paid off a dental loan, and increased my available credit, and my score is now about 720. Credit scores are a scam and basing anything but applications for credit on them should be a felony.
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The components of a credit score aren't some state secret. FICO publishes a helpful infographic. I agree they are overused, but you shouldn't have to wonder why have a given score. If you've truly kept your utilization low and paid all bills on time, you should double check there hasn't been some identity theft.
[1]https://www.myfico.com/credit-... [myfico.com]
I actually hit 850 for a while but am now lower 800s after paying off my mortgage. Anything over high 700s doesn't make a practical difference.
[1] https://www.myfico.com/credit-education/whats-in-your-credit-score
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> The components of a credit score aren't some state secret.
No, they're a lie.
> FICO publishes a helpful infographic.
The infographic is propaganda, and answers zero questions about how the factors which make up each group are actually calculated.
> If you've truly kept your utilization low and paid all bills on time, you should double check there hasn't been some identity theft.
I have been watching Experian. There hasn't been anything unrelated to me appearing on my credit report, but my score has gone down as I have behaved faithfully and paid off my debts on schedule. Anyone who believes what FICO claims about scoring is a fool, and anyone who then goes on to repeat their propaganda for them is also a tool — and not the sharpest
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Sounds like you are salty because you aren't getting the score you want. They aren't out to get you. They are in the business of analyzing the risk of debtors and have no incentive to misidentify risk.
There are certainly reasons to be frustrated with the credit reporting system. They keep and distribute a ton of your personal information and seem to be hit by data breaches on an annual basis.
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Calm down, Bernie Sanders. It's a metric used for risk determination, it's not a scam. If you wanted to talk about misuse of the metric to determine outright costs for things other than loans, I'm all ears (looking at you, insurance companies). But to stomp your feet and call it a scam is misguided at best.
You stated your score dropped from 790 to 720 by paying off debt. That makes sense, because part of the score (they publish this too, if you care to read it) is credit utilization. While the bullet poin
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> That makes sense, because part of the score (they publish this too, if you care to read it) is credit utilization.
Basing a person's credit score on credit usage rather than payment history is part of the system's bullshit. Why is a person with less debt but ample credit history seen as more of a liability than one with more debt when both pay their bills on time?
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> Basing a person's credit score on credit usage rather than payment history is part of the system's bullshit.
Sort of, but lenders aren't looking for people who have good financial sense.
Lenders are looking for people who will borrow a lot of money, then continue paying on that loan. Which is not the same thing as having financial sense.
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So to bring things back full circle, the parent at the top is correct. Credit scores and not a sign of financial stability or ability to pay back a loan. It's just a determinant for how much money they can make off you.
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Payment history is in fact the #1 factor. However, it's not that the person with "less debt" is more of a liability. The metric of credit utilization is the amount of credit you have access to but do not use. Low credit utilization means you have less likelihood of default because you have other credit you can access. Imagine two scenarios:
Borrower 1: Has $50,000 credit limit card but never uses more than $5,000 of it. At a minimum, borrower 1 has access to $45,000 if they need it.
Borrower 2: Has $5,000 lim
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Borrower 1 has the capability to take on $45k in unsecured debt at a moment's notice. If they do this, they might be too stretched to afford to pay me back. I would rather lend to 2.
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I agree with drinkyourpoo, credit scores are not reflective of your ability to responsibly manage your finances. I am fortunate that I do not have to care about CS at this point in my life, but I recall earlier in my life where I had to "game" the system and take unneeded loans only to make payments on them so I can increase my score.
What pisses me off is that CS now widely used in other areas. For example, WTF my auto insurance wants to know my CS when I am offering to pay upfront (single payment)? Why do
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> but my score has gone down as I have behaved faithfully and paid off my debts on schedule.
That is very possible because having open (especially long term) debts improves your credit rating. Once you pay it off completely, it's not open anymore.
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They don't like big changes. Don't get more credit and keep your debt to credit ration below 20% and in the next year and you'll see that score increase. I've sat at 750-800 for 2 decades with ease. Getting that debt paid of was huge, but getting more credit may not have been the wisest choice.
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That take is just so far from reality it's bonkers. People with high credit scores tend to a) not take on as much debt, and b) get significantly better interest rates when they do. The last time we switched mortgage providers, our mortgage broker said our credit scores were probably the highest he'd seen in over a decade of doing this, and he went back to the lender and negotiated an extra half percent lower interest rate than what they offered, which was already below prime. Credit score is a measure of
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I don't know my own FICO score. I have zero debt and pay the statement balance on my CC every month. It's useless to me.
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Are you sure about that?
I carry zero debt except for a 3.785% mortgage. Credit card (singular) is paid off every month, I don't use other forms of credit and I pay cash for cars. The credit industry gets the merchant fees from me, minus my 1-1.5% cash back rewards, and that's it.
835 FICO
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also the FICO scale is stupid. A lousy score is 700, a great one's 820. A corpse has a credit score of 600. Maybe widen the scale and stratify for reality?
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That is only true for those folks who don't need credit scores, they already have considerable wealth. For most folks if you have a sub 600 score you are either early in the game, young and just starting out, or it's pretty clear you have a hard time dealing with paying your debt or have way over extended yourself.