How Buy Now, Pay Later schemes could affect your credit score soon
FICO announced a new model that will factor Buy Now, Pay Later (BNPL) loans into consumer credit scores, marking a significant shift in creditworthiness assessment.
The new scores, available to lenders from autumn, aim to provide increased visibility into consumers' repayment behavior and responsibly expand credit access, especially for those with limited credit histories.
A joint study with Affirm indicated that consistent on-time BNPL repayments could lead to improved credit scores, potentially enhancing access to traditional loans and rentals.
Consumer advocates raised concerns about 'loan stacking' and 'phantom debt,' warning that integrating BNPL into scores could have unforeseen negative effects on 'credit vulnerable' communities.
While not expected to be an immediate 'game-changer' for consumers with established credit profiles, the change could create a more accurate picture of consumer debt, potentially preventing over-extension.
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