Expert Take: Buy now, help me later, or hurt my finances?
Stash Wealth CEO Priya Malani and Paula Pant, the host who Podhyny Anything Podcast Talk is currently buying, will pay later.
- FICO incorporates purchases now and pays your loan data later.
- The change is intended to provide lenders with a more complete picture of consumer repayment habits.
- Responsible use of BNPL can improve your credit score, but excessive or missed payments can hurt them.
FICO has announced that it will pay later loans to people’s credit scores starting in fall 2025 and start factoring them with purchases now.
Credit scores affect the ability of Americans to get loans, buy cars and homes, and rent apartments. FICO, a data analytics company whose credit model is used for most lending decisions, said the scores that account for BNPL loans give lenders a more comprehensive view of consumer repayment behavior.
In a collaborative study simulating the inclusion of BNPL data in AFFIRM, FICO found that the impact of scores was generally consistent with the opening of new accounts.
FICO offers several scoring models. Nerdwallet spokesman Sara Rathner said lenders adopting the new scoring would take time and that most consumers would likely not notice the change this fall.
“A variety of scoring models are designed for different focus,” Lassner said. “It can take years before these are adopted primarily in decision-making and may not be adopted by lenders for any type of borrowing.”
Still, FICO said the introduction of this new kind of scoring represents a major change as lenders keep up with increasing dependence on consumers on BNPL loans.
FICO responds to the growing popularity of BNPL
The younger generation appears to be the most common adopters of digital BNPL loans.
Apps like Klarna, Affirm and Afterpay have easily protected your loans. Often, it can be done on mobile devices without hard credit checks, allowing consumers to undertake many loans at once.
The use of these loans at Gen Z and Millennials appears to have accelerated last year by around 10% of each cohort using them.
This comes after the increasing popularity of the digital BNPL platform, and its use has slowed for three years.
“It’s convenient, but some people probably reach out to it because they’re a bit financially stressed,” said David Tinsley, senior economist at the Bank of America Institute.
Who will change help and hurt
Changes in FICO could actually improve your credit score in order to responsibly use BNPL loans to delay payments for large purchases such as appliances, computers, or wedding dresses.
Russner said credit institutions have already found ways to consider ways to miss or delay paying people’s scores, but the change could be more perceived for the habit of people repaying loans on time.
“We certainly see this recognition that there are many ways for consumers to take financial responsibility,” she said. “Therefore, it is absolutely beneficial for consumers to consider that type of action in their decision-making when evaluating a loan.”
Tinsley also uses them with low-income consumers with high delinquency rates, knowing that some people are drawn to BNPL loans and as a way to spread their payments, they have the cash to make them.
Of course, if a consumer gets several BNPL loans at once and doesn’t pay them back, FICO’s new scoring model is another way for lenders to clearly identify their behavior.
What do you think if you are using a BNPL loan?
Before agreeing to a BNPL loan, Rasner encourages consumers to read the fine print and ensures they know what time they need to pay.
“Look at all other financial obligations, especially if you’re using a buy now, you’ll pay frequently later and have multiple plans at once,” she said.
Tinsley said consumers should remember that BNPL loans are typically on a tighter repayment schedule than credit cards. So, they may have an initial zero selfish grace period, but they are usually less flexible too.
If people can’t make payments on time, they could be hit harder with deferred and assertive fees than they would have faced with a credit card purchase.
“Buy now can be an incredible tool to pay later,” Lassner said.
How does BNPL affect my credit score?
If consumers are concerned about how BNPL loans are affecting their credit scores, Rasner encourages them to check their scores online.
If you check your score, it won’t be dropped. Make sure it’s accurate, says Rathner. If you see an account with a list of them, if you don’t remember opening it, it can be a sign of scams or errors. Please report it to your credit bureau and financial institution.
If you apply for a loan and are denied or dissatisfied with the terms offered, don’t be afraid to speak up.
“It helps you talk to the lender about the factors that led to their decision and understand if there are any actions that will improve your odds later,” she said.
If a consumer believes that the lender’s decision is unfair and based on inaccurate information, he can file a complaint with the Consumer Financial Protection Bureau.
Reach Rachel Barber at rbarber@usatoday.com Follow her at x @rachelbarber_
