Credit Scores Plunge—Largest Annual Drop Since 2008 Financial Meltdown

American creditworthiness takes a nosedive—just when the economy needs consumers most.

Defaults creep up as household budgets strain under persistent inflation and mounting debt burdens. Lenders tighten standards while borrowers face higher rates on everything from auto loans to credit cards.

Remember when central bankers said inflation would be 'transitory'? So did everyone's 800+ credit scores.

This isn't 2008's mortgage crisis—but the warning signs flash amber. Consumers pull back on spending just as corporate earnings need their support.

Traditional finance's fragility shows again why decentralized alternatives gain traction. While FICO scores tumble, blockchain-based credit protocols operate without begging permission from the same institutions that created this mess.

Key Takeaways

• The average FICO score dropped to 715 in April 2025, down from 717 in 2024, because of rising credit utilization and increased delinquencies.
• Student loan delinquencies surged after COVID-19 protections ended, appearing on borrowers’ credit reports in early 2025.
• Gen Z has been hit the hardest, with their average scores falling more than other groups due to student loan burdens.
• The last time scores fell this much or more was in 2009, when the average dropped three points.

In the past year, credit scores have declined at their fastest rate since the Great Recession as borrowers deal with elevated inflation, high interest rates, and an uptick in student loan delinquencies.

In a recent FICO report, the data analytics company behind the FICO score revealed that the average credit score declined to 715 in April 2025, down two points from 717 the previous year. That's the fastest rate of decline since 2009, when the FICO score average dropped to 687, down from 690 in 2008.

Reminder

FICO's score range is 300 to 850, with higher scores indicating greater creditworthiness to lenders and lower scores signaling the opposite.

What's Behind The Credit Score Decline?

According to the report, credit utilization—or the ratio of credit someone uses to the total amount of credit they're extended—has been on the rise since the COVID-19 pandemic. The credit utilization ratio as of April 2025 was 35.5%, up from 29.6% in April 2021.

"Average consumer credit card balances and utilization continue to increase since these metrics bottomed out in 2021, when the personal savings rate increased because of government stimulus and pandemic-era travel and entertainment restrictions," the report stated.

Related Stories

Another factor causing the decline in credit scores is an uptick in delinquencies, driven by an increase in student loan delinquencies. Severe delinquencies, or loans that are late by 90 days or more, ROSE to 9.8% in April 2025, up from 7.9% in April 2024.

Why are student loan delinquencies on the rise? During the pandemic, the TRUMP administration implemented a payment pause for federal student loan borrowers, suspending payments and stopping interest from accruing on balances.

That payment pause was extended by the Biden administration until September 2023. However, the Biden administration gave borrowers an 'on-ramp' period of one year, during which interest WOULD accrue on borrowers' balances, but late or missed payments would not be reported to credit agencies. The on-ramp period ended in September 2024.

And as a result, student loan delinquencies started showing up on borrowers' credit reports in February 2025, according to FICO. Between February and April of this year, FICO found that 3.1% of people with FICO scores had a student loan delinquency added to their credit file.

Gen Z’s Credit Scores Are Taking the Biggest Hit

This has negatively impacted Gen Z in particular. The younger generation is twice as likely to have current student loans as the total population. Accordingly, Gen Z experienced an average year-over-year score decline of three points, the greatest of any age group, according to the report.

"Gen Z consumers have had less time to build savings, and are less likely to benefit from stock market gains and home price appreciation," the report states. "Instead, they are more likely to have affordability issues and more likely to face the impacts of higher interest rates and inflation."