The average FICO credit score in the United States recently dipped, primarily due to the growing number of student loan borrowers falling into severe delinquency. This trend, which emerged in the early months of 2025, has sparked concerns about the financial health of millions of borrowers and their ability to maintain a solid credit score. The resurgence of student loan delinquencies following the end of the COVID-19-related payment pause has been the key factor driving the decline.
FICO Score Trends
- As of February 2025, the average FICO score for U.S. consumers stood at 715.
- This represents a one-point decrease from January and a two-point drop compared to the same time the previous year.
- The decline is attributed to an increase in severe delinquencies, particularly from student loan borrowers who have resumed payments after the pandemic-related pause ended in 2024.
- The Federal Reserve estimated that up to 9.7 million borrowers could see their credit scores drop due to missed student loan payments.
The Impact of Student Loan Delinquency on Credit Scores
- The end of the federal student loan payment pause in October 2024 has led to a rise in delinquencies.
- A one-year “on-ramp” grace period was provided, allowing missed payments not to be immediately reported on credit reports.
- However, 2.7 million student loan accounts were already marked as delinquent by February 2025, and many borrowers have yet to resume payments.
- The missed payments are now beginning to affect credit scores, lowering them for those affected.
- Credit scores play a key role in securing financing, and lower scores can result in higher interest rates or difficulty qualifying for loans.
Delinquency Rates on the Rise
- The percentage of consumers with a 90-day delinquency increased from 7.4% in January to 8.3% in February 2025.
- This marks the highest delinquency rate since before the pandemic.
- The increase is largely due to student loan borrowers who have not resumed payments.
- Another 5.4 million borrowers are at risk of falling behind in payments, further contributing to the delinquency rate.
Long-Term Consequences of Delinquency
- Delinquent student loans can stay on a borrower’s credit report for up to seven years, negatively impacting their ability to qualify for loans or credit.
- Even after catching up on payments, delinquencies can continue to affect credit history and hinder financial opportunities.
- Borrowers facing delinquencies may find it difficult to access affordable mortgages, car loans, or other financing options.
What Can Borrowers Do?
- Borrowers struggling with student loan payments can explore various relief options:
- Income-driven repayment (IDR) plans that base payments on income and family size.
- Forbearance, which temporarily postpones payments but still accrues interest.
- Loan rehabilitation programs for those already in default, allowing borrowers to restore their loans to good standing by making small, consistent payments.
- To learn more about repayment options, borrowers can visit the Federal Student Aid website for comprehensive guidance on managing student loan debt.
Mitigating the Impact of Delinquencies
- Although student loan delinquencies have negatively impacted credit scores, there is some positive news:
- Credit card balances have declined following the holiday season, which may help improve credit utilization ratios and positively affect credit scores.
- Borrowers should focus on paying bills on time, reducing outstanding credit card balances, and seeking available repayment options to gradually improve their financial standing.
Conclusion
The decline in the average FICO score in 2025, driven by the return of student loan delinquencies, highlights the challenges borrowers face in managing their financial obligations. With millions struggling to resume payments, the effects on credit scores could have lasting consequences. However, proactive measures like enrolling in repayment programs and seeking financial counseling can help borrowers avoid long-term damage to their credit and work towards rebuilding their financial health.
