If you’ve used a buy now, pay later (BNPL) service to split up the cost of concert tickets or a new pair of sneakers, you’re not alone. These short-term loans have become a staple in online shopping carts across the country, especially among younger shoppers. Until now, though, your BNPL activity has mostly flown under the radar of the credit bureaus. That’s about to change, and it could have a real impact on your financial profile.
Fair Isaac Corp. (NYSE: FICO), the company behind the FICO score, is updating its credit scoring models to include BNPL loans. The new approach is set to roll out later this year, and it’s designed to give lenders a clearer picture of how consumers are using these increasingly popular loans.
BNPL services like Affirm, Klarna, and Afterpay have made it easy to break purchases into smaller, interest-free payments, often with just a few taps on your phone. The catch? These loans haven’t typically shown up on your credit report unless you missed a payment and it went to collections. That meant your FICO score, which is used in about 90% of lending decisions in the U.S., didn’t reflect your BNPL activity.
Lenders, however, have been pushing for more transparency. As BNPL usage has soared, Americans spent more than $116 billion using these services last year, up from just $2 billion in 2019, lenders have wanted a better way to assess risk and understand a borrower’s true financial obligations.
Starting this fall, FICO will offer two new versions of its credit score: FICO Score 10 BNPL and FICO Score 10 T BNPL. These models will incorporate data from BNPL loans, giving lenders an additional tool to evaluate creditworthiness.
Buy Now, Pay Later (BNPL) accounts will be grouped together instead of being treated as multiple new credit cards, which helps prevent consumers from being unfairly penalized for using BNPL for several purchases simultaneously. On-time payments on BNPL loans can positively impact credit scores, as FICO’s early tests indicate that consumers who consistently pay on time may see their credit scores rise or remain stable. However, missed payments have a greater impact now, with negative marks appearing on credit reports more quickly, similar to how missed payments on traditional loans or credit cards are handled.
For most people, the impact of the new scoring model will be similar to opening a new account, with FICO estimating an average change of about 10 points either way. If you’re a responsible BNPL user, this could be a chance to build your credit history. But if you’re juggling multiple BNPL loans and struggling to keep up, it could make it harder to qualify for future loans or credit cards.
It’s also important to note that not all BNPL providers are reporting data to the credit bureaus yet, and not all lenders will immediately adopt the new FICO models. So, while the change is significant, it may take time before it’s reflected everywhere you apply for credit.
The inclusion of BNPL data in FICO scores marks a shift in how creditworthiness is measured. For Fair Isaac it’s a response to the evolving ways people borrow and spend. For consumers, it’s a reminder to treat BNPL loans with the same care as any other form of credit. Make payments on time, keep track of your obligations, and understand that your online shopping habits could soon play a bigger role in your financial future.
