When Danny Benson started applying for apartments after graduating from Syracuse University in May, he assumed the hardest part would be finding the right location. He didn’t expect to be rejected before he got an opportunity to submit an application.
Since Benson, 22, didn’t have a credit card during college, he had no credit history. He tried to fix that with a Discover card in June. But the only option the bank gave him was a secured card, which requires a minimum security deposit of $200.
Benson said the deposit requirement established “a dynamic of distrust” and decided not to apply for the secured card. He moved back home with his parents.
Many members of Generation Z are trying to build independence in an economy that is stacked with financial hurdles. Gen Zers are often in their early to late 20s, prime years for establishing credit. But pandemic-era spending, student loan delinquencies and inflation have left many young Americans vulnerable to long-term financial strain. Simultaneously, entry-level jobs are becoming scarcer, and beginner credit products are becoming harder to get.
As a result, Gen Z borrowers have seen the steepest decline in credit scores of any age group this year. Their average FICO score fell to 676, well below the national average of 715, according to the inaugural FICO Score Credit Insights Report.
Gen Z has had fewer opportunities than older generations to build credit early on. Before the Credit CARD Act of 2009 was enacted, credit card companies targeted students on college campuses, providing them with easy access to credit. Many young adults also now rely on debit cards or “buy now, pay later” loans for daily expenses, neither of which contributes to credit building.
“With fewer traditional ways to build credit, like homeownership, Gen Z is finding it harder to establish and maintain a strong credit profile,” said Allie Danziger, senior vice president of AscentUP, a professional development and career readiness platform.
Capital One and Bank of America offer secured and entry-level options. Yet beginner cards are becoming increasingly restrictive and often come with high interest rates, minimal rewards and confusing terms, said Carlo Kobe, CEO of Fizz, a digital fintech helping college students build credit.
This article originally appeared in The New York Times.
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