Buy Now, Pay Later’ Hurt You
A major shift is coming to how credit scores are calculated in the United States, and it could affect millions of consumers who use “Buy Now, Pay Later” (BNPL) services. FICO, the company behind the most widely used credit scoring model in the country, has announced that it will soon begin factoring BNPL loans into its credit scoring formula—a move that could have both positive and negative consequences for consumers depending on how they manage these short-term loans.
What Is ‘Buy Now, Pay Later’?
“Buy Now, Pay Later” services have exploded in popularity in recent years, offering consumers a way to purchase goods immediately and pay off the balance in installments—usually over a period of a few weeks to a few months. Major players in the BNPL space include Affirm, Klarna, Afterpay, and PayPal’s Pay in 4. These services are especially popular with younger consumers and online shoppers, who use them to finance everything from clothing to electronics without needing a traditional credit card.
BNPL loans are often interest-free if paid on time, and they typically don’t require a hard credit check to qualify. Until now, they have also been largely invisible to the major credit bureaus, meaning they had little to no impact on a consumer’s credit score.
FICO’s Big Change
That’s about to change. In a landmark announcement, FICO revealed that its latest scoring model—FICO 10T and a new BNPL-specific variation—will incorporate data from BNPL loans. This includes details like the number of BNPL loans a consumer has opened, their payment history on those loans, and whether any payments were missed or accounts sent to collections.
The goal, according to FICO, is to better reflect the full scope of a consumer’s borrowing behavior in the modern economy. With BNPL usage surging—some estimates suggest over 100 million Americans have used BNPL at least once—FICO argues that leaving these transactions out of credit scores provides an incomplete picture of financial responsibility.
Will This Help or Hurt Your Credit Score?
The impact of including BNPL data in credit scores will largely depend on how consumers use the service:
Positive Effects: For consumers who use BNPL responsibly—by making payments on time and not overextending themselves—the new FICO model could actually boost their credit score. Regular, on-time payments demonstrate financial discipline and may improve a consumer’s credit profile, particularly if they don’t already have much credit history.
Negative Effects: On the flip side, those who miss payments, frequently open multiple BNPL accounts in a short period of time, or carry outstanding balances could see their scores drop. BNPL accounts that are sent to collections—an all-too-common outcome when users mismanage multiple loans—will now directly impact a consumer’s creditworthiness.
Neutral or Mixed Outcomes: Consumers who occasionally use BNPL but pay off balances quickly might see little to no change, especially if these accounts remain in good standing. However, the cumulative effect of many small loans could raise concerns about potential overleveraging.
Why This Matters Now
FICO’s decision reflects a broader push among credit reporting agencies and lenders to adapt to evolving consumer finance trends. Experian and Equifax have already begun incorporating some BNPL data into consumer credit reports, although the data is often limited and not uniformly reported by all BNPL providers. FICO’s move adds weight to the idea that BNPL is no longer a fringe product, but a mainstream financial tool with real consequences for credit profiles.
Additionally, this change comes at a time when economic uncertainty and rising consumer debt are putting more pressure on individuals to manage their finances wisely. With inflation pushing prices higher and traditional credit card interest rates soaring above 20% in many cases, BNPL has become a lifeline for some—but a trap for others.
What Consumers Should Do
With this new credit scoring model on the horizon, financial experts recommend that consumers:
Monitor Your BNPL Use: Keep track of how many BNPL loans you’ve opened and your payment due dates. Overuse can now affect your score.
Make Payments On Time: As with credit cards, missed or late payments on BNPL loans will negatively impact your score once reporting is standardized.
Check Your Credit Reports: Watch for BNPL loans beginning to appear on your credit report, and dispute any inaccuracies.
Use BNPL Strategically: Don’t use BNPL for impulse purchases or as a substitute for income. Treat it with the same caution as any other form of debt.
Stay Informed: Not all lenders and credit bureaus will adopt the FICO 10T model right away. Ask your lender or check which FICO version is being used when applying for credit.
The Bottom Line
FICO’s move to include BNPL loans in credit score calculations is a game-changer, and one that signals the continuing evolution of how creditworthiness is measured in an increasingly digital and fragmented financial world. For some, it presents an opportunity to build or strengthen their credit profile using a product they already rely on. For others, it’s a wake-up call that even short-term, low-stakes loans can carry long-term consequences.
Whether this change helps or hurts consumers will ultimately depend on how wisely they use BNPL services—and how ready they are to adapt to a credit landscape that’s rapidly changing.
