Alison Heller, Sales Director, Consumer Finance at Equifax Workforce Solutions
The number of Gen Z consumers with credit files grew from 20 million in 2021 to 34.5 million in 2024, quickly overtaking millennials and the Silent Generation in terms of credit file presence. Yet despite this growth and displaying attributes that are strong indicators of creditworthiness, Gen Z borrowers often hit roadblocks in gaining access to credit.
When it comes to managing their personal finances, Gen Z is a unique demographic. They are the first true generation of digital natives, generally financially savvy and tend to favor debit cards, digital wallets and buy-now-pay-later (BNPL) services. These alternatives serve similar purposes as credit products, but do not help bolster a member’s traditional credit score.
This can become an issue for many credit unions that still rely exclusively on conventional scoring models to evaluate a borrower’s ability to repay. Building good or excellent credit can take years of responsible financial behavior, yet many young consumers lack the borrowing history needed to generate a strong traditional credit score.
Too often, this reinforces the perception of Gen Z as high-risk borrowers, making some lenders hesitant to approve auto loans or mortgages or to issue credit cards. However, traditional scores alone don’t always provide a complete view of a person’s financial health.
Economic forces impacting Gen Z
2025 has been marked by economic uncertainty, driven by factors like rising costs of living, persistent inflation, the return of student loan payments and tariffs on foreign goods. These pressures contribute to financial strain and could further impact the credit profiles of young borrowers. On average, Gen Z holds a VantageScore of 665, which sits at the lower end of the “very good” range.
As affordability becomes a top concern, credit unions must consider how they can best support Gen Z members amid ongoing economic and financial volatility. One approach is to look beyond traditional scoring models and use alternative data to fill in the gaps and build a more complete picture of a member’s financial profile. For example, sources like rent payments, utility bills and employment or education history can be layered with a traditional credit score to create a fuller profile. Most U.S. adults have at least one utility or mobile bill in their name and that can offer valuable insights into that member’s financial responsibilities and payment behaviors.
This approach not only helps improve underwriting accuracy without loosening credit standards but also expands the number of Gen Z borrowers credit unions can serve, which can be an important step in growing a larger, more diverse membership base.
Leveraging technology to meet Gen Z’s needs
As digital natives, Gen Z expects well-designed services and processes that respect their time and align with their preferences. This extends to their financial institutions as well.
Relying on manual processes for loan approvals can slow things down and add friction to the member experience. Credit unions that still ask applicants to submit paper-based documents like W-2s, pay stubs or proof of residence risk falling behind more modern competitors. Younger consumers have grown accustomed to fast, intuitive digital experiences and will quickly look elsewhere if their expectations aren’t met.
To remain competitive, credit unions should consider integrating modern data and technology solutions that allow for personalization and speed. Tools like automated verification of income and employment (VOIE) help validate member information quickly and securely, minimizing the need for manual processing and providing a more seamless member experience.
This level of automation also enhances risk management, as embedding VOIE within the loan process helps position institutions to reduce the risk of human error and unreliable borrower-provided submissions. Additionally, real-time employment data makes it easier to detect changes in borrower capacity throughout the loan lifecycle.
The bottom line
Staying relevant with Gen Z is vital for addressing the reality of an aging membership base. The average credit union member is currently 53 years old, with baby boomers making up the largest membership group.
This presents both a challenge and a unique opportunity for credit unions, prompting them to modernize their offerings and deliver meaningful value to the next generation of members. This can be accomplished by implementing automation and incorporating alternative data sources to effectively serve the shifting needs of Gen Z.