Gen Z Credit Scores Decline: Experts Offer Steps to Rebuild
NEW YORK (AP) – A growing โnumber of โGen Z consumers are experiencing drops in their credit scores, raising concerns about their future financial opportunities. While โขmany in this โgeneration are new to credit, a combination of economic pressures and evolving financial habits are contributing to the trend, leaving them possibly facing higher interest rates on loans and difficultyโ securing housing.
This decline comes at a critical juncture for young adults as they begin to navigateโฃ major life milestones like renting apartments, purchasing cars, and eventually, buying homes. A healthy credit score is essential for accessing theseโ opportunities at favorable terms.Experts โขemphasize that understandingโ your credit standing and proactively building positive financial habits are crucial steps toward securing a stable financial future.
“Knowing โyour current score, whetherโฃ it’s good or notโ great, can definitely help you make a planโฃ for the โfuture,”โ said Alev, anโ expert onโค credit โscores. “You โฃneed to know where you stand to be able to โคtake action.”
Fortunately, checking yourโค credit score doesn’t have โฃto be a financial burden. Experian, FICO and Credit Karma are among the companies that offer free credit score access. However, it’s crucial to remember that a credit scoreโ is simply aโค number. “While your credit score isโ essential to keep your financial life healthy, it’s important to remember that it’s just a numberโ and it doesn’t define youโข as a person,” Alev added.
One of the most significant factors influencing your credit score is on-time payment history. According to Lee,”The โone most important factor โin the FICOโ score calculation is whether you make your payments on time. And that’s about 35% ofโข the score calculation.” To avoid missedโ payments, especially when managing multipleโข debts, Alev recommends setting up automatic payments.
Another key component is credit utilization – the amount of credit you’re using compared to yourโ total available credit. Keeping this percentage low is beneficial, but โฃexperts advise against aiming for 0%. โA healthy range is between 10%โฃ and 30%.
If you’re already struggling with debt, experts strongly advise against taking on more. “if you’re โขjuggling several credit card payments and other โdebts, it’s bestโ if you โdon’t acquire more debt if you can avoid it,” theโค article states.
Ultimately, credit scores are not static. “Theโข FICO score is โdynamic. It changes based on how you make your payments,” Lee explained. “So your score, if you wantโฃ to maintain it or improve it, you can do so by exhibiting โขgood credit behavior.” โคBy โฃimplementing positive โฃfinancial habits, Gen Z consumers can actively workโ towards improving their credit scores and โsecuring a brighter financial future.
The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy.โ The autonomous foundation is separate from charles Schwab and Co. Inc.โ The AP is โฃsolely responsible for its journalism.