By James Farias
Founder & CEO, Relief Strategies, LLC
Quick Summary
The average FICO credit score in the U.S. just posted its largest single-year decline since the Great Recession, a seemingly small two-point drop that signals far deeper financial trouble. This article breaks down why such a minor shift is truly historic, what it reveals about American household stress, and what every borrower needs to understand right now.
A Two-Point Drop: Why It’s Big News
At first glance, a two-point fall in the national average hardly seems cause for alarm. Scores typically move slowly, fluctuating by only a point or two in most years, thanks to how FICO designs its model for stability. This year’s decline, however, marks a dramatic reversal after more than a decade of rising scores, even through the pandemic and other disruptions.
For more than a decade, Americans saw their credit scores climb almost every year, a reassuring sign of household recovery since the 2008 financial crisis. This positive trend included the tumultuous pandemic era, when scores edged upward or stayed steady. Now, back-to-back declines are appearing for the first time since the Great Recession, drawing attention from industry experts and signaling that the economic environment has fundamentally shifted. Ethan Dornhelm, FICO’s vice president of predictive analytics, called it “the first time in well over a decade that the score went down,” underscoring the rarity of this trend.
What makes this drop so serious is what’s driving it: increasing delinquencies on car loans, personal loans, and credit cards, together with the burden of resumed student loan payments and generalized cost-of-living stress. While the average fell by two points, borrowers in more vulnerable categories (especially Gen Z, recent delinquents, and those juggling heavy balances) often saw much steeper drops, many by 20 points or more.
This emerging divide among consumers aligns with what economists call a “K-shaped” economic recovery. Tommy Lee, senior director at FICO, explains that while some Americans are benefiting from stock market gains and rising home values, others are struggling with elevated interest rates and affordability problems. This growing disparity is clearly reflected in the credit score distribution, where increasing numbers of borrowers fall into both high and low extremes rather than the middle.
The average credit card utilization rate reached 35.5% in 2025, marking a multi-year high. This reflects Americans’ heavier reliance on credit to cover daily expenses, a factor that intensifies credit risk and puts additional downward pressure on scores.
Federal student loan delinquencies have surged to record highs since pandemic forbearance ended. Millions of accounts have shifted from current to delinquent, contributing further to declining scores. FICO forecasts continued declines as these trends become increasingly visible in credit reports.
The Real-World Impact
Credit scores aren’t just numbers, they’re gatekeepers for financial opportunity. Even minor aggregate declines mean more people crossing the thresholds that banks use to raise interest rates or deny loans. For example:
- Borrowers on the edge of “prime” credit (670+) may lose access to affordable loans.
- Higher utilization rates and missed payments are pushing millions into riskier credit categories with tangible financial consequences.
- Rental applications, insurance rates, and even job prospects can be affected when scores fall below certain cut-off points.
The two-point national average signals that millions are feeling this pain at once, and it has ripple effects that disproportionately hit those already struggling with debt or reduced income.
Tommy Lee, senior director at FICO, described the current economy as “K-shaped,” where some Americans benefit from rising stock and home values while others struggle with steep interest rates and affordability. He observed that those hardships are reflected in the widening credit score disparities.
What Borrowers Should Watch For
- Early Warning: Aggregate drops in score averages rarely happen and tend to precede wider financial crises. The last time numbers dropped this quickly, it signaled the start of the Great Recession.
- Underlying Volatility: Averages hide the sharper declines many individuals are experiencing. For those in debt relief or settlement, these trends may mean their personal scores are falling much faster.
- Danger of Complacency: Ignoring even small changes can mean missing the start of a much larger trend that will impact loan costs, credit access, and household budgets.
Final Thoughts
While two points may seem trivial, the stability of the FICO scoring system and the rarity of national declines mean this move is a red flag for American households. By the time larger drops become headlines, many borrowers will have already felt the sting in higher costs and fewer financial options. Understanding the “why” behind these numbers, and acting early to protect and rebuild credit, is more important now than ever.
Need Help?
Relief Strategies can walk you through your options and help you protect your future while addressing the stress today.
Visit ReliefStrategies.com or contact us at (888) 870-7922 for a free consultation.
About the Author
James Farias is the CEO of Relief Strategies, LLC, a firm dedicated to helping individuals achieve financial freedom through effective debt relief solutions. With over 30 years of business leadership experience and a deep passion for empowering others, James has guided many clients through the process of reducing debt and regaining control of their finances.
He understands how quickly debt can overwhelm even disciplined individuals and focuses on strategies that lower monthly payments, relieve financial stress, and create opportunities for a more secure future. Connect with James on LinkedIn or visit Relief Strategies to learn more about how he and his team can help you build financial confidence.
Sources:
- Fast Company. (2025, September 16). U.S. credit scores suffer largest two-year drop since Great Recession. fastcompany.com.
https://www.fastcompany.com/91405390/u-s-credit-scores-suffer-largest-two-year-drop-since-great-recession - CNN. (2025, September 16). Credit scores drop at fastest pace since the Great Recession. cnn.com.
https://www.cnn.com/2025/09/16/economy/debt-credit-score-student-loans - USA Today. (2025, September 16). Average FICO score sheds 2 points in 2025. usatoday.com.
https://www.usatoday.com/story/money/personalfinance/2025/09/16/average-fico-score-drops-2025/86094248007/ - FICO. (2025, May 20). Average U.S. FICO Score at 717 as more consumers face financial headwinds. fico.com.
https://www.fico.com/blogs/average-u-s-fico-score-717-more-consumers-face-financial-headwinds - People. (2025, September 16). Credit scores dip at fastest rate since Great Recession as Americans grapple with student loans and high prices. people.com.
https://people.com/national-credit-scores-dip-at-fastest-rate-since-great-recession-11811188 - Experian. (2025, August 7). What is the average credit score in the US? experian.com.
https://www.experian.com/blogs/ask-experian/what-is-the-average-credit-score-in-the-u-s/
