Millions of Americans who rely on 'Buy Now, Pay Later' (BNPL) schemes for everything from clothing to concert tickets will soon see these short-term loans directly impact their credit scores, marking a significant shift in how consumer creditworthiness is assessed. Scoring giant FICO announced on Monday that it is rolling out a new model that will factor these popular payment plans into its consumer scores, which are used by the majority of lenders to determine a borrower’s financial reliability.
Previously, BNPL loans were largely excluded from credit reports, though Buy Now, Pay Later provider Affirm began voluntarily reporting 'pay-in-four' loans to Experian, a separate credit bureau, in April. The new FICO scores will become available to lenders as an option from the autumn, aiming to provide increased visibility into consumers' repayment behaviour. However, widespread adoption may take time, as not all BNPL companies share data with credit bureaus, and not all lenders will immediately opt into the new models, according to Adam Rust, director of financial services at the non-profit Consumer Federation of America.
