US consumers are feeling the stress of inflation, interest rates, report shows

FICO reports increased U.S. consumer financial stress, with the national FICO score dipping slightly and a decreased proportion of individuals in the 600-749 credit score range since 2021. This trend is notably driven by Gen Z adults facing record-high student loan delinquencies, where over 10% of monitored borrowers are behind on payments. While the average FICO score of 715 remains near historical highs, the company cautions it is a lagging indicator, suggesting potential future credit quality deterioration despite some large banks' current optimistic assessments.

Analysis

Fair Isaac Corporation (FICO) data reveals emerging financial stress among U.S. consumers, representing a potential leading indicator of broader economic weakness despite some conflicting reports. While the national average FICO score has only dipped slightly to 715, a more significant shift is occurring in the composition of credit quality; the share of the population with scores between 600 and 749 has contracted from 38.1% in 2021 to 33.8% in 2025. This deterioration is most pronounced among Gen Z adults, driven by record-high student loan delinquencies, with over 10% of monitored borrowers with student debt falling behind on payments. This cautious data point from FICO contrasts with recent assertions from some large banks that consumer financial health remains robust. However, FICO itself warns that the average score is a lagging indicator, suggesting the observed stress in specific cohorts could foreshadow a more widespread decline in future credit quality.

Key Decisions for Investors

• Investors should scrutinize holdings in consumer discretionary sectors and lenders, particularly those with high exposure to younger demographics or subprime borrowers, as these cohorts are showing the most acute signs of financial strain.
• Monitor high-frequency credit performance data, such as monthly delinquency rates for auto loans and credit cards, as these will serve as confirmation of whether the stress identified in student loans is spreading.
• Pay close attention to upcoming earnings reports from major banks for any increase in loan loss provisions or net charge-offs, which would validate FICO's cautious outlook over the banks' more optimistic public commentary.