FICO Will Soon Factor ‘Buy Now, Pay Later’ Into Credit Score
Your “buy now, pay later” (BNPL) habits may soon directly impact your credit score.
FICO, the company behind the most widely used credit scores in the U.S., announced Monday that its upcoming scoring models will include data from BNPL transactions for the first time. The move reflects the growing popularity of these short-term installment loans, which let consumers split payments on everything from electronics to takeout meals.
Until now, BNPL loans have largely flown under the radar of credit bureaus, with most repayment activity going unreported. That’s about to change.
“By capturing a broader view of consumer credit behavior, lenders believe they can make more informed decisions, ultimately benefiting both the industry and consumers,” said Julie May, vice president and general manager of B2B Scores at FICO.
Whether this change will help or hurt individual credit scores depends on the borrower. A joint study released in February by FICO and BNPL provider Affirm found that most users with five or more BNPL loans saw their credit scores either improve or stay the same.
Still, data from the Consumer Financial Protection Bureau shows BNPL users often have riskier financial profiles and skew younger.
The upside? Responsible BNPL users may now have a new path to building credit. The downside? Missed payments could start dragging scores down.
FICO plans to launch the updated credit scores this fall.