You can use “Buy Now, Pay Later” for just about everything now, from Costco purchases to DoorDash (although that doesn’t mean you should). About 86.5 million people used BNPL in 2024, according to Capital One’s research. But the one thing BNPL couldn’t do was improve your credit. Although some of Affirm’s plans do report to Experian and TransUnion, most BNPL services don’t report on-time payments to credit bureaus. However, that could change later this year.
FICO, one of the two major credit scoring models, this week unveiled its FICO Score 10 BNPL and FICO Score 10 T BNPL scoring models, which will now take BNPL plans into consideration when creating credit scores. The new scoring models are slated for release in the fall.
There are a few reasons why it’s taken some time for BNPL to hit your credit reports. For one, BNPL plans are technically loans, but work similarly to revolving accounts, which makes them difficult to quantify. They’re also easier to qualify for, stack and pay off, so they pose issues with existing scoring models when determining account age and credit use.
Here’s how the new models are tackling these short-term loans and how it could boost or hurt your credit score.
How FICO will score BNPL plans
When BNPL plans hit your credit report, you’ll receive two scores: one based on the existing FICO model and one taking the new BNPL calculations into account. This provides more information for lenders to consider when evaluating borrowers, without really impacting the older models. However, whether these new scoring models help people or hinder them remains to be seen.
According to John Ulzheimer, a credit expert formerly of FICO, Equifax and Credit.com and founder of creditexpertwitness.com, FICO’s existing scores would have counted each new BNPL as a fresh account. Because BNPL plans typically only span a couple of months, this could drag down your average account age, a factor that accounts for 15% of your credit score.
“So, you could harm your score by having too many newly opened accounts, which lowers your average age of accounts,” he said.
But with these new credit scores, Ulzheimer said FICO has found a way not to consider each new BNPL as its own loan, which should minimize harm. Even if you stack multiple BNPL accounts, as long as you make your required payments, you shouldn’t see a drop in credit score.
“Installment debt is almost benign to scores, as long as it’s being paid on time. So I wouldn’t worry about loan amounts, especially for BNPL, which tend to be very low,” Ulzheimer added.
How long until we see an impact?
These new scores will be released in the fall but it will likely be even longer before we see wide adoption.
“It takes years for new scoring models to gain traction so I would not expect to see mass adoption by lenders out of the gate,” Ulzheimer said. “That would be historically atypical. And, of course, only lenders that care about how BNPL loans are handled in FICO scores would be interested in these new models.”
Does this change how you should use BNPL plans?
Not really, unless you’re stacking too much debt and not able to make your payments on time. Like most loans and other credit products, the most important thing is to be able to responsibly manage your debt — that means not spending money you aren’t able to pay back in time. As long as you’re doing that, the new scoring models shouldn’t negatively impact your finances.
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