FICO’s BNPL Credit Score Integration: What You Need to Know Now
FICO’s BNPL Credit Score Integration: What You Need to Know Now
Effective this fall, FICO, a leading credit scoring company, will begin incorporating data from ‘Buy Now, Pay Later’ (BNPL) loans into some of its credit scoring products. This significant shift aims to provide lenders with a more comprehensive view of consumers’ financial health, reflecting the widespread adoption of BNPL services.
BNPL options, which allow shoppers to split purchases into installments, have become ubiquitous, particularly online. Services like Affirm and Klarna offer flexible payment plans, often interest-free if paid on time, making them a popular choice for managing expenses. The Federal Reserve reported that in 2024, 15% of American adults utilized BNPL services within a 12-month period.
This integration means that timely BNPL payments could positively impact an individual’s FICO score, potentially aiding those new to credit in establishing a financial history. Conversely, missed payments could negatively affect scores, similar to traditional credit products. While FICO’s year-long study indicated a generally small impact (within 10 points) for most consumers, the change is crucial for lenders seeking to assess creditworthiness more accurately and avoid over-extending credit.
It’s important to note that while BNPL loans are increasingly treated like credit cards, they may not offer identical consumer protections, particularly regarding dispute resolution. Consumers should be aware of their rights and the terms of their BNPL agreements as these services continue to evolve within the financial landscape.
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