# Gen Z Credit Scores Dropped to 676. Here's What's Actually Driving It
Gen Z's average credit score has plummeted to 676, sitting 38 points below the national average of 714. This drop stings even for those doing everything right: paying bills on time, opening credit cards responsibly, yet watching their scores fall anyway. The culprit is not carelessness. Two major factors are tanking Gen Z credit profiles right now.
The first factor is the resumption of student loan payments. Federal student loans entered a payment pause in March 2020 during the pandemic. Borrowers enjoyed three years of relief. That pause ended in October 2023, and monthly payments resumed. For millions of Gen Z borrowers still in their twenties, this represented their first real credit report hit from active loan payments. Many had built credit histories only during the pause, meaning their credit files never reflected the weight of student debt. Now that payments are live, credit utilization spikes. Credit utilization measures how much of your available credit you are using relative to your credit limits. It accounts for 30 percent of your FICO score. When student loan payments restart, debt-to-income ratios climb, and utilization ratios climb with them.
The second major driver is the end of pandemic-era payment deferrals across the credit system. Credit card companies, auto lenders, and mortgage servicers all offered forbearance programs during the pandemic. Those safety nets have largely disappeared. Missed payments and late payments now hit credit reports faster and harder than they did before. Gen Z faces tougher credit conditions with less padding for financial mistakes.
New credit inquiries also play a role, though less dramatically. When you apply for a credit card, lenders pull your credit report. Each hard inquiry drops your score by a few points. Multiple applications within a short window compound the damage. Gen Z may have opened new accounts to build emergency reserves, but the act of applying for credit temporarily lowered their scores.
The income side complicates the picture further. Gen Z entered the workforce during economic uncertainty. Wage growth has not kept pace with inflation. Student debt payments now consume a larger chunk of take-home pay than they did for previous generations at the same age. This leaves less cash for other obligations. When cash flows tighten, credit card balances rise, and payment patterns suffer.
What makes this period tricky is the lag effect. Credit scores move slowly. A recent missed payment or high utilization spike takes time to materialize as a lower score. By the time Gen Z sees their scores drop, the damage was already done one or two months ago. Rebuilding requires consistent on-time payments over months, not weeks.
The good news: credit scores are recoverable. Paying every bill on time is the single strongest lever. Lowering credit card balances below 30 percent of your credit limit helps immediately. Avoiding new credit applications for several months prevents additional hard inquiries. For Gen Z, the path forward is patience combined with disciplined payments. The 38-point gap versus the national average will close, but only with sustained financial behavior changes.