The company that leads in credit scoring, Fair Isaac Corp. (FICO), announced yesterday that it will take into account people’s buy now pay later (BNPL) loan payments while evaluating credit scores.
FICO’s new model will group multiple BNPL loans and minimize penalties for frequent usage—especially if payments are on time. However, missed payments will now have a more direct impact on credit scores.
The change also comes as BNPL providers like Affirm started reporting these loans to credit bureaus recently.
Unlike traditional credit, BNPL loans haven’t been visible to lenders, masking “phantom debts.”
An April survey by LendingTree found that 41% of users made late payments on their loans, up from 34% last year. Swedish fintech Klarna, which offers BNPL loans, reported its Q1 consumer credit losses rose 17% year over year.
FICO’s new model will group multiple BNPL loans and minimize penalties for frequent usage—especially if payments are on time. However, missed payments will now more directly impact credit scores.
The move could help borrowers with thin credit histories who make BNPL payments on time. But it may hurt those who miss payments.