Five Ways Gen Z is Shaping the Future of Credit and Financial Behavior

As personalized experiences become increasingly vital, businesses face a significant opportunity — and challenge — in meeting the unique needs of today’s consumers. This reality is particularly true with the rapid number of Gen Z entering the credit system. During the January 2025 Market Pulse webinar, our experts shared how, over the past four years, the number of Gen Z consumers on credit files has surged by more than 76 percent, growing from 20 million in 2021 to 34.5 million in 2024.¹ 

Once perceived as skeptical of credit, Gen Z has proven otherwise, now surpassing both the Silent Generation and Millennials in credit file presence. Born between 1997 and 2012, this generation’s older members (18 and up) are shaping financial trends, even as their average VantageScore of 665 reflects their limited credit history.¹ Understanding this growing demographic’s financial behavior is essential as their influence will likely extend into significant markets like real estate. We’ve rounded up the top five data points you need to know. 

Gen Z's Affordability Challenges and Opportunities for Buying Homes and Cars¹

Gen Zers face significant challenges as they seek to invest in the real estate and auto markets:

• Economic pressures – Inflation, high interest rates, and stagnant wage growth disproportionately impact Gen Z, making it harder to afford homes and cars.

• Student debt – Many face student loan payments for the first time, adding to financial strain.

• Wealth gap – Competing with older generations, who built wealth in more stable economic times, is challenging.

• High housing costs – Home prices have outpaced wage growth, and many Gen Z spend over 30 percent of their income on rent, making saving difficult.

• Early career wages – Low starting salaries further hinder saving for big purchases like homes.

But not all the cards are stacked against Gen Z buyers. Multiple factors stand in their favor: 

• Government support – Programs for first-time homebuyers offer financial relief.

• Generational wealth transfer – Some Gen Z may benefit from wealth passed down directly from grandparents.

• Adaptability – Gen Z’s tech-savviness, including potential to leverage AI, could provide innovative ways to navigate economic challenges.

Gen Z Credit Card and Banking Behaviors¹

What about Gen Z ‘s relationship with credit? Gen Z shows high credit engagement, with around 68 percent of Gen Z consumers opening a new credit card, nearly double the rate of millennials (35 percent). Moreover, they show the highest credit utilization rates and a strong appetite for new financial products. 

When it comes to banking, Gen Z tend to have several main motivations for opening accounts. From 68 percent of Gen Zers who aim to build credit history to 31 percent who want to increase credit limits and 24 percent who seek better rewards programs, such as travel or other perks, Gen Z consumers are looking to take advantage of the opportunities banking affords.

Overall, Gen Z consumes information differently, favoring digital over brick-and-mortar channels. To improve Gen Z engagement, companies should craft their marketing strategies to focus on tailoring marketing messages to Gen Z preferences and needs.

Card Usage and Debt Growth Among Younger Generations¹

Inflation has played a notable role in the financial decision-making of Gen Z consumers. Rising costs due to inflation have significantly influenced consumer debt, particularly among younger generations entering the credit market. Credit card balance growth from 2019 to 2023 shows Gen Z with over 219 percent growth, reflecting both increased card adoption and higher balances among existing cardholders. In contrast, millennials saw approximately 60 percent credit card balance growth, Gen X came in with around 35 percent growth, and the Silent Generation/boomers had only 10 percent growth.

Multiple factors contribute to this growth disparity between generational consumers:

• Younger generations face greater affordability challenges, such as high housing, auto costs, and everyday expenses.

• Shifts in credit usage preferences and reliance on credit for essential and large purchases have amplified this growth.

Impact of Student Loans on Credit Scores and Profitability in 2025¹

In addition, Gen Zers now must factor in the role of student loans to their financial planning. With the end of administrative forbearance, student loans are back in repayment, and delinquency reporting is expected soon (likely February 2025). Prior to the pandemic, delinquency rates stood around 40 percent. The resumption of reporting is expected to impact credit scores, particularly for Gen Z borrowers, many of whom are experiencing repayment for the first time. The return of delinquencies and repayment trends will influence profitability in 2025. Moreover, federal policy changes, including past Biden administration debt reduction efforts and potential shifts under the new administration, may further impact the student loan landscape.

Changes in Payment Hierarchy Over the Last 10 Years¹

When examining the payment hierarchy in the last decade, we can identify some key overall trends. Top priorities across all generations, including Gen Z, are auto loans, consumer finance, and HELOCs, which consistently rank highest in payment hierarchy. On the other hand, bank cards are typically relegated to the bottom of the hierarchy across generations.

Surprisingly, Gen Z has shown a prioritization of auto loans, despite earlier trends of delaying licenses. Retail cards rank even lower than bank cards in payment priority, especially in the last two years, as younger Gen Z members join the credit ecosystem.

During the forbearance period, student loans were deprioritized as they weren’t part of immediate obligations, making them an exception in the hierarchy.

Keep Your Business Goals Within Sight

Need your business run better and more efficiently? Reach out at riskadvisors@equifax.com to learn more about how data-driven solutions can boost growth.  

We hope you will join us for our February 2025 Market Pulse webinar taking place on Thursday, February 20, 2025, when we show how to stay ahead with account origination. To ask questions from top economists in real time and gain deeper insights before anyone else, you simply have to be there. 

Find our monthly Small Business Insights, National Consumer Credit Trends reports, the Market Pulse podcast, and more at our Market Pulse hub. 

Broaden your perspective with insights that inspire bold innovation, confident adaptation, and decisive leadership through our Trends and Insights resources. 

Finally, connect with us on YouTube and LinkedIn for even deeper insights.

Source:

1. Equifax, January 2025 Market Pulse Webinar 

*The opinions, estimates, and forecasts presented herein are for general information use only. This material is based upon information that we consider to be reliable, but we do not represent that it is accurate or complete. No person should consider distribution of this material as making any representation or warranty with respect to such material and should not rely upon it as such. Equifax does not assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice. The opinions, estimates, forecasts, and other views published herein represent the views of the presenters as of the date indicated and do not necessarily represent the views of Equifax or its management.