Why Is Gen Z’s Credit Score So Low?

Research from Zuto shows that Gen Z is the generation most likely to apply for finance but the least likely to match the profile that lenders prefer. This makes it harder for younger adults to secure loans or credit, even as they try to build independence.

In a survey carried out in April 2024 among 864 respondents from its customer marketing list, Zuto found that many people do not know their own credit score. Among those aged 20 to 29, 48% admitted they had no idea what their score was. In comparison, 63% of millennials in their 30s said they were aware of theirs.

The survey also found what Zuto called “credit score anxiety”. Across all age groups, 55% of people said they worried about checking their credit score, while 45% said they worried about not checking it. For Gen Z, who already face hurdles in accessing finance, this nervousness adds another obstacle.

 

What Habits Are Influencing Their Credit Record?

 

Buy now, pay later services are popular among young people. These schemes are often criticised, but Zuto notes that if payments are made on time they can strengthen a credit score. Missed repayments, though, can quickly cause damage.

Another key habit Zuto mentioned is registering to vote. Even those who do not plan to cast a ballot can improve their financial profile by being on the electoral roll. It helps lenders confirm an address history over the past 3 to 5 years, which makes applications more convincing.

Phone contracts also play a part. Getting a new phone on contract can be harder if a credit check fails, but a SIM-only contract is often easier to obtain and counts towards building credit when payments are made regularly.

Rent payments are another area often overlooked. Rent is usually the largest monthly cost, yet it does not always count towards a credit file. Zuto says that tenants can now report rent to credit reference agencies, which can be especially helpful for those who do not use credit cards or loans.

Unused credit cards are another factor, according to the research. Many people open accounts but avoid using them due to anxiety. Zuto advises keeping card spending under 30% of the total limit and paying bills on time, since this is one of the clearest ways to build trust with lenders.

 

Can Mistakes Cause Lasting Damage?

 

Problems often arise when buying goods such as clothes, electronics, or vehicles. Zuto advises that even if a customer feels a refund is due, it is important to keep making repayments while the issue is being sorted out. Stopping payments can harm a credit score, even if money is later returned.

Forgetting to update details after moving can also be a contributor because it makes it harder for lenders to assess applications. Keeping address history accurate for the past 3 to 5 years gives banks more confidence in the person applying…

 

Experts Share Why They Think Gen Z Struggles With Credit

 

Experts share their thoughts on why Gen Z’s credit score is so low. Here’s what they have to say…

 

Gerard Boon, Managing Director, Boon Brokers

 

 

“Gen Z’s low credit scores are a reflection of both the current economic environment and the realities of a “debt society,” and the relationship between finance and success is often linked to taking on credit.

“Unlike previous generations, many young adults today are navigating negative wealth, where the cost of living outpaces income and leaves very little room to save. As a result, people are being pushed to rely on debt to bridge everyday expenses, from rent to bills.

 

 

“While the concept of ‘debt’ was once demonised, today’s generations often rely on credit, reinforcing a cycle in which credit scores serve both as a marker of financial caution and, paradoxically, a limitation on future opportunities.

“Unfortunately, this reliance on debt is especially evident in the housing market. Securing a mortgage has become increasingly challenging for young buyers, as lenders place significant weight on credit scores and borrowing history. Even small, responsible use of credit may not offset the broader lack of financial history, leaving many Gen Zer’s at a disadvantage when trying to step onto the property ladder. In essence, the very tools designed to help households manage their finances can now act as barriers to wealth-building.

“The concept of a “debt society” also highlights a structural shift: while older generations may have been able to build savings before taking on credit, today’s young adults often face the reverse. They are taking on debt earlier – whether through student loans, living costs, or often on non-essential ‘necessities’ – all in an economy where wages have stagnated and inflation has eroded disposable income. Naturally, this has long-term consequences not only for credit scores but for financial confidence, the ability to invest in property, and overall economic mobility.

“Addressing this increased debt requires a dual approach. I believe that Gen Z must be encouraged to engage with credit strategically, building a track record without overextending themselves. On a systemic level, policymakers and lenders need to recognise the structural pressures that create negative wealth and reliance on debt, adjusting credit assessments and mortgage access criteria to reflect the new realities of financial life for young people. Without this, the cracks in a debt-driven economy will only deepen, leaving an entire generation at a disadvantage in achieving financial stability and homeownership.”

 

Elliot Schwartz, CEO, Becca’s

 

 

“Gen Z’s lower credit scores are primarily linked to a few different factors, some of which include fewer credit options, increasing living expenses and an increased use of high-interest debt. Many of them are just beginning their adult financial journeys, meaning they likely have thinner credit files and fewer years of on-time payments which weigh into credit scoring models.

“Furthermore, continuing high inflation and student loan weights contributes to skipping over their traditional use of credit and relying more on credit cards or buy-whenever pay-later, which with limited experience can lead to mismanagement quite quickly with utilisation which can cause scores to fall as well at the same time.

“For improvement, Gen Z should aim to build their credit gradually, not chasing a fast solution. This could start with some things like opening a revolving credit card or becoming an authorised user on a parent’s card; again, overtime running a report will help to pay in full each billing cycle and to keep a low usage compared to their available credit.

“Other strategy would be avoiding missed payments, pulling credit reports for errors or duplicate accounts, not having overuse of buy-now-pay-later products if unreliable credit or credit history . Credit scores really come down to a long-term representation of the habits of responsibly paid financial obligations on time, not of efforts of the individual to jump start their scores due to limited experience. So the best thing to do is to start with what they have, be disciplined and allow their score to increase naturally overtime with their credit history.”

 

Jo Allsop, Director Of Lenders, Zuto

 

 

“Our data and industry research shows that Gen Z is the age group most likely to apply for finance to purchase items such as a car. But they often find it difficult to access as they do not fit lenders’ profile of a “typical” borrower.

“The rise of the gig economy and zero hours contracts has changed workforce patterns and financial behaviours. Meanwhile people remain in the family home for longer: in the past year alone, more than 250,000 people looking to finance a second-hand car purchase through the Zuto platform were young adults living with parents.

“This means that, although they may have the financial means to manage repayments, they may have fewer options due to having an unfixed salary, limited bills in their name or a thin credit profile.

“There are ways that people can improve their credit rating, however.

“One way is to start by using companies that perform soft credit searches. At Zuto, we have worked with our car finance partners to develop this capability. It means that any enquiries can’t be seen by other potential lenders, as opposed to hard searches which are visible on credit reports and can impact the credit score.”