Collection Agencies NAICS 561440

Sep 22, 2025 - Gen Z Credit Scores Dropping

• Gen Z is experiencing the steepest decline in credit health, according to a new FICO report. The national average credit score fell two points in 2025 to 715, but Gen Z’s average dropped three points to 676, the largest year-over-year decline for any age group since 2020. Student debt is the primary driver: 34% of Gen Z consumers carry student loans, double the 17% rate among the general population. The end of the federal payment pause in October 2024 and the resumption of delinquency reporting has weighed heavily on scores. About 5.3 million borrowers are already in default, facing wage garnishment and tax refund seizures. Credit scores are critical in determining borrowing ability, meaning Gen Z could face higher costs for everything from credit cards to car loans. The report underscores the disproportionate financial strain younger borrowers face as repayment pressures mount.
• Credit card delinquencies fell slightly to 3.05% in the first quarter of 2025, according to the Federal Reserve Bank of St. Louis. While delinquencies seem to have plateaued, they remained at a 13-year high. Credit card delinquencies tend to be a six-to-nine-month early indicator of credit card charge-offs. Credit card charge-offs – when a credit card company writes off an unpaid loan as a loss and reports it to a credit agency – reached an 11-year high in the fourth quarter of 2024. Charge-offs in Q1 2025 also fell to 4.67%, down 2% from the previous quarter. Both delinquencies and charge-offs have declined for three straight quarters. As charge-off placements lag by 9-12 months, continued drops indicate less consumer stress and held debt.

• About 5 million student loan borrowers will have their outstanding balances sent to collection agencies by the Department of Education on May 5, potentially negatively affecting credit scores for millions. If a student loan borrower hasn’t made a payment in more than 270 days the loan is considered in default. When that happens with a federal student loan, the government can send it for collections, garnish wages, or take Social Security funds or income tax refunds. The situation dates back to President Biden pausing student loan payments for 12 months in 2023, and did not count late payments towards default. That moratorium ended in October 2024, and with the announcement of collections resuming under Trump, almost 9 million student loan borrowers will automatically be deemed delinquent in their payments. Delinquency can cost a borrower an average of 170 points on their credit rating, per the New York Federal Reserve.
• The Conference Board’s Consumer Confidence Index fell 7.2 points to 92.9 in March 2025, the fourth straight month the index has fallen, reflecting consumer worries about a weak market, future employment, and salary growth. Confidence in the stock market in particular was down for the first time in two years. Only 37% of consumers expected stock prices to rise in 2025, while 44% expected them to go down. The Expectations Index - based on consumers’ short-term outlook - dropped 9 points to 65.2 (anything below 80 historically usually indicates a coming recession). According to Conference Board economist Stephanie Guichard, “Consumers’ optimism about future income - which had held up quite strongly in the past few months - largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations.”