Key Points:
- More than 25% of Gen Z adults opened at least one new credit card over the past year.
- FICO data shows 48% of Gen Z relied on credit cards to survive job loss or income reduction.
- The average Gen Z credit score recently dropped to 678, falling well below the national average of 714.
- The return of student loan payments caused massive financial strain for millions of young borrowers.
Young adults are signing up for credit cards faster than anyone else in the country. A new report from the credit scoring company FICO shows that Generation Z is opening credit accounts at a record pace. The data reveal that more than 25% of Gen Z adults, ages 18 to 29, opened at least one new credit card in the past year. This marks the highest rate among all age groups.
The massive grab for plastic is not about buying luxury items. Young adults simply need a way to pay their basic bills. FICO vice president Jenelle Dito explained that when faced with job loss or income reductions over the past 12 months, 48% of Gen Z relied on credit cards to make ends meet. Millennials followed close behind at 43%. In sharp contrast, only 25% of Gen X and a mere 7% of baby boomers needed credit cards to survive tough times.
Almost 40% of all Gen Z respondents said they open new cards specifically to create a financial cushion. This reliance on debt highlights the severe financial squeeze crushing young Americans. A separate study earlier this year found that over 60% of older Gen Z workers either stopped contributing to or significantly reduced their retirement savings. Two-thirds of these young workers admitted they simply could not save money because everyday living costs drained their bank accounts first.
Despite the struggle to save, young adults show flashes of good financial behavior. Financial firm Fidelity recently noted that 34% of Gen Z account holders actually contributed to their Individual Retirement Accounts between January 1 and March 20. This savings rate beat older generations during the same time frame. Only 20% of millennials and 13% of Gen X account holders contributed to their own retirement funds.
While some young people save, their overall credit scores continue to plunge. As of late 2025, Gen Z held the lowest average credit score of any age group at 678. This number represents a three-point drop from the previous year. It also sits far below the national average score of 714. Financial experts classify a score of 678 as merely fair or competent.
FICO scores serve as a financial report card. The three-digit numbers range from 300 to 850 and track an individual’s spending habits and total debt. Lenders view a score of 740 or higher as low risk. They rate scores between 740 and 799 as very good, while anything above 800 earns an exceptional rating. Gen Z currently sits far away from these top tiers.
Experts know exactly what caused the sudden drop in credit scores. Ethan Dornhelm, head of scores analytics at FICO, pointed the finger directly at student debt. He noted that the government recently forced borrowers to resume their monthly student loan payments. This sudden extra bill pushed the average young adult credit score slightly lower across the board.
The student loan problem is massive. FICO research shows that nearly one-third of student loan borrowers missed a payment recently. This means 7.1 million people saw a brand-new delinquency appear on their official credit file. That single missed payment dragged their average credit score down by a massive 62 points since January 2025.
Surviving on an entry-level salary feels impossible for many young workers. When a young adult tries to balance daily living costs, student loan payments, and rising credit card debt, the math simply breaks down. Data from Experian shows that last year, the average Gen Z consumer carried a revolving credit card balance of $3,493.
Financial planners understand exactly why this generation is drowning in debt. J. Victor Conrad, founder of Pinnacle Financial Strategies, explained the daily reality for young workers. He noted that people in their 20s usually have very little extra cash at the end of the month. If they fall slightly behind on a bill, or if their annual salary increase fails to keep pace with the rising cost of rent and groceries, they have no choice but to reach for a credit card.
