Facing a Precarious Economy, Gen Z Turns to Credit

Why It Matters

Rising credit use among financially vulnerable Gen Zers reshapes lenders’ portfolio strategies and signals broader economic stress for younger consumers. If unchecked, deteriorating scores could tighten credit access just as this cohort becomes the next generation of high‑value borrowers.

Key Takeaways

• Over 25% of Gen Z opened a new credit card last year.
• Gen Z average credit score fell to 678, lowest among age groups.
• Nearly 40% use new cards as financial cushion amid job instability.
• Student loan repayment resurgence drove higher delinquencies for Gen Z borrowers.
• Issuers see Gen Z as long‑term profit despite higher short‑term risk.

Pulse Analysis

The surge in credit‑card openings among Gen Z reflects a broader shift in how younger Americans manage financial volatility. FICO data shows that more than a quarter of 18‑ to 29‑year‑olds added a new card in the last twelve months, a rate unmatched by any older cohort. This behavior is less about rewards and more about immediate cash flow, with 40% of respondents treating fresh cards as a safety net amid layoffs, reduced hours, or gig‑economy income swings. The trend underscores a generation that is both financially ambitious and exposed to macro‑economic headwinds.

Credit‑score deterioration compounds the risk picture. The average Gen Z score of 678 places the group in the “fair” to “competent” range, three points lower than the previous year and well beneath the national average of 714. A key driver is the resumption of student‑loan payments, which has triggered a wave of new delinquencies—nearly one‑third of borrowers reported a recent delinquency. As scores slip, access to affordable credit may become more constrained, potentially amplifying financial stress for a cohort already juggling debt, housing costs, and a precarious job market.

For issuers, the data presents a paradoxical opportunity. While Gen Z’s credit profiles are riskier in the short term, they also represent a pipeline of lifelong customers. Companies are increasingly adopting cradle‑to‑grave strategies, accepting higher initial risk to lock in relationships that could yield mortgages, 401(k) contributions, and other high‑margin products as these consumers age. This long‑view approach may drive more nuanced underwriting models, targeted financial‑education initiatives, and product designs that balance profitability with the need to support a financially fragile generation.