Many consumers have been using buy now, pay later payment options like Affirm, PayPal Credit or Klarna — surveys put usage at 20% to 30%. It’s not only convenient, but some people also like that these payment plans do not involve credit checks or impact credit scores. But that may be changing soon. FICO, the leading credit-scoring model, last week announced it will be debuting two new scores this fall — FICO Score 10 BNPL and FICO Score 10 T BNPL.
[Read: Best 0% APR Credit Cards.]
How the New BNPL Scores Will Work
These new FICO scores — developed based on FICO’s joint study with Affirm — will be the first ones in the industry to incorporate BNPL data, FICO says. The scoring models will treat BNPL activity differently from credit cards, loans and other products, however. For one thing, the models will aggregate BNPLs used within a certain time frame, rather than individually count them as separate loans, which would have a negative impact if counted that way.
Will BNPL Data Count in All Scoring Models Going Forward?
It’s possible that BNPL activity will eventually make its way onto all credit reports, and eventually credit scores, but it’s going to be a gradual process. For example, Affirm recently began reporting all activity to Experian and TransUnion, making it likely that other companies may follow suit.
However, no other plans have been announced for including BNPL in credit scoring calculations beyond FICO’s two coming scores.
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What the New Scores May Mean for Consumers
Like anything credit-wise, the new BNPL scores could help or hurt consumers, depending on whether they are using the payment option responsibly or not.
In theory, positive BNPL activity could help consumers build their credit and expand their credit access. This can be especially true for people who are newer to the credit world and may not yet have opened credit cards or other types of loans. In fact, younger consumers are the ones most likely to use BNPL services, according to J.D. Power — with 42% of Gen Y and Gen Z saying they use BNPL.
On the flip side, people who overspend or overuse BNPL and end up paying late or defaulting would see their scores drop.
[Read: Best Debt Consolidation Loans.]
How Will Lenders Use the Data?
Given the popularity of BNPL, it makes sense that lenders would want more insights into how prospective borrowers are using these plans.
According to a FICO news release, “These scores provide lenders with greater visibility into consumers’ repayment behaviors, enabling a more comprehensive view of their credit readiness, which ultimately improves the lending experience.”
What remains to be seen is if these new scores will end up opening more credit access to consumers who frequently use BNPL or cause lenders to be more cautious with approvals.
How to Protect Your Credit When You Use BNPL
If you are a BNPL user, it will become even more important to use the services responsibly once lenders have access to credit scores that include BNPL activity. Here are a few best practices to follow to protect your credit health:
— Maintain a cash cushion to cover your BNPL payments. This is especially important if you have more than one BNPL plan going simultaneously or if you have other automatic payments set up.
— Avoid impulse purchases. Just because you’re splitting up payments doesn’t mean they’re more affordable. For example, if your BNPL plan is four payments in six weeks, that’s less disposable income you’ll have over three or so pay periods (if you get paid biweekly). If other expenses come up during that time, you could leave yourself short.
— Consider other interest-free options for large purchases. If you want to finance a large purchase without paying interest, you could look into getting a 0% APR credit card. Or you could also see if a deferred interest offer is available (as you might find at a furniture store, for example). Just be sure with deferred interest you pay it off in time or you’ll be hit with interest on the full amount.
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BNPL Coming to FICO Credit Scores Later this Year originally appeared on usnews.com
Update 07/01/25: A previous version of this story misstated the level of activity that Affirm currently reports. It reports all activity to Experian and TransUnion.
