FICO finds Gen Z leans on credit cards to cover basic expenses
A growing share of Gen Z consumers are opening new credit card accounts to cover everyday expenses they otherwise cannot afford. Fresh FICO data show their credit profiles are taking more damage than those of any other generation, according to U.S. News.
More than 25% of Gen Z adults aged 18 to 29 with a FICO Score opened at least one credit card in the past year, the highest rate of any age group, according to FICO data.
Gen Z credit utilization rates far exceed the threshold lenders prefer
Gen Z cardholders have carried a credit utilization rate of roughly 44% since October 2023, well above the 30% ceiling financial professionals recommend, the FICO Spring 2026 Credit Insights report found.
Borrowers with the strongest scores typically keep their ratio under 10%, which means Gen Z is carrying four times the ideal level, FICO noted.
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Utilization is the second most influential factor in FICO score calculations, trailing only payment history in determining a borrower's score.
The report showed that 14.4% of consumers aged 18 to 29 experienced score drops of 50 points or more, compared with 10.1% of the broader population.
"Gen Z understands that having a credit history is important, but they don't have a framework to really understand it," Sheila Walsh, a certified financial planner and faculty member at Georgetown University, told U.S. News.
Walsh explained that many young borrowers mistakenly believe carrying a monthly balance strengthens their credit profile, when the opposite is true. "Early credit can be sensitive, so a late payment or high credit utilization can manifest as volatility, and can lead to a larger score drop," she noted.
Financial pressure is pushing Gen Z to treat credit cards as emergency funds
The surge in new credit card accounts among younger Americans reflects deeper financial strain rather than a simple pursuit of rewards. Nearly four in 10 Gen Z respondents told FICO they would likely open new credit cards specifically to create a financial cushion.
Among Gen Z respondents who experienced job loss or reduced income in the previous 12 months, 48% leaned on credit cards to cover basic expenses.
That compares with 43% of Millennials, 25% of Gen X, and just 7% of baby boomers, FICO Vice President Jenelle Dito told Yahoo Finance.
...Many Gen Z borrowers are facing the same financial challenges brought on by high interest rates and inflation. As a result, they are tapping into these available credit products to help them cope with rising expenses.
FICO research found that 34% of Gen Z consumers carry student loan debt, double the 17% rate in the general population.
Roughly 7.1 million student loan borrowers with a payment due saw a new delinquency reported to their credit files after pandemic-era protections ended, with an average score drop of 62 points since January 2025, according to Ethan Dornhelm, head of scores analytics at FICO.
"Gen Z consumers who have student loans and thin credit histories are at a huge risk for late or delinquent payments," Paige Wingler, vice president of consumer lending at Skyla Federal Credit Union, told U.S. News.
Gen Z's credit slide is reshaping the national FICO average
The average FICO Score dropped to 714 in the Spring 2026 FICO Score Credit Insights report, continuing a gradual decline from 2023. Gen Z saw the largest drop of any generation, falling to 676, 38 points below the national average, which Dornhelm attributed in part to the resumption of student loan delinquency reporting.
Bankcard delinquency rates have risen 48% since 2021, and national credit card utilization now sits at 35.5%, FICO confirmed.
A record 48.1% of Americans hold scores of 750 or higher, while lower-scoring borrowers fall further behind.
Roughly 53% of Gen Z respondents in a July 2022 Capital One Insights Center survey incorrectly believed that carrying a credit card balance each month boosts their score, compared with only 16% of the Silent Generation.
FICO's Spring 2026 survey shows the gap persists, with two-thirds of consumers unsure whether income directly affects credit scores.
"Errors happen, and it's important to monitor your credit report," Walsh told U.S. News. "Being aware and building early habits can help shape a healthy credit profile for years to come."
Related: Credit card debt dips but the real story is much worse
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This story was originally published May 26, 2026 at 7:33 PM.