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Your Bank Might Punish You for Those ‘Buy Now, Pay Later' Purchases
Your Bank Might Punish You for Those ‘Buy Now, Pay Later' Purchases

Wall Street Journal

time2 days ago

  • Business
  • Wall Street Journal

Your Bank Might Punish You for Those ‘Buy Now, Pay Later' Purchases

Banks don't want you bingeing on 'buy now, pay later' plans, and they say it might actually hurt your chances of getting approved for a mortgage or credit card. Some of the popular point-of-sale loans from companies such as Affirm and Klarna will be factored into credit scores later this year when FICO rolls out its new scoring model. Using a loan to pay for a couch or a pair of pants in installments might improve your score if you keep up with payments, according to Fair Isaac Corp., the company behind the most widely used U.S. credit score.

How two new government policies could help make housing more affordable in Nashville
How two new government policies could help make housing more affordable in Nashville

Axios

time2 days ago

  • Business
  • Axios

How two new government policies could help make housing more affordable in Nashville

Housing stakeholders in Nashville hope two new policies — one at the federal level and another at the local level — play at least small parts in making homeownership more affordable and accessible. Why it matters: No single policy will magically solve the city's affordability crisis, but every drop in the bucket helps. Experts say the new policies could especially benefit new homeowners. Driving the news: The Federal Housing and Finance Administration announced a new policy allowing lenders to factor in a prospective homebuyer's rent payment history when approving a mortgage application. Up to this point, lenders used the FICO system, which considers a borrower's credit card and loan history when calculating their creditworthiness. Experts say the old system gave FICO a monopoly, and that adding in the new VantageScore credit score option creates competition that should lower fees for borrowers. The big picture: National Realtors Association chief advocacy officer Shannon McGahn applauded the policy shift, saying it "better reflects how today's consumers manage their finances." FHFA director Bill Pulte took a victory lap after the announcement and credited President Trump for the policy change. He says the competition will help homeowners. The policy will take some time to be implemented as FHFA works out administrative details. What she's saying: Christi Wedig, a loan originator with CMG Home Loans, tells Axios the FHFA policy switch should help borrowers like young people and immigrants who haven't taken out a loan or a credit card. "I think it's going to be really helpful across the country, and particularly here in Nashville," she says. "Rent is not cheap here. If you're paying $2,500 to $3,000 a month, you deserve some impact on your credit score." Yes, but: There are also risks since a single missed payment for a utility bill or rent didn't impact a person's credit score in the past. There's also the question of whether a landlord reports successful rent payments to VantageScore, something a local mom and pop landlord may not do. Wedig says it's important renters make sure their payments are verifiable through transaction history such as checks, electronic transfers or Venmo. Renters can register their own payment history through third-party companies to boost their VantageScore rating, although that service typically costs money. Metro approves new multi-family construction rule Zoom in: At the local level, Metro Council passed legislation last week that updates codes regulations to allow a multi-family building to be constructed with a single staircase. The policy applies to buildings up to six stories. Homebuilders say the policy will significantly lower their costs, which should benefit both renters and condo buyers. Between the lines: Advocates, such as Metro Councilmember Rollin Horton, say the single-stair design is cost effective and "just as, or even more safe" for residents. The state passed enabling legislation allowing local governments to implement the new code. Council members collaborated with the Fire Marshal's office, Codes Department and Planning Department to create the policy.

FICO To Roll Out New Scores to Reflect Your "Buy Now, Pay Later" Habits, Impacting Millions of Americans' Credit
FICO To Roll Out New Scores to Reflect Your "Buy Now, Pay Later" Habits, Impacting Millions of Americans' Credit

Yahoo

time3 days ago

  • Business
  • Yahoo

FICO To Roll Out New Scores to Reflect Your "Buy Now, Pay Later" Habits, Impacting Millions of Americans' Credit

"Buy now, pay later"users may hurt their credit if they don't pay back those loans on time. Credit score overseer Fair Isaac (NASDAQ:FICO) announced new scoring models last month that will evaluate BNPL usage when determining credit worthiness. The program, scheduled to roll out this fall may help some folks gain access to better loan terms but failing to pay on time is going to hurt. The processing services let retailers provide installment loans at the point of sale so buyers can spread out payments. The loans may have no interest or service fees, potentially encouraging customers to overspend. Not surprisingly, a Bankrate survey released in May showed that about 'half of buy now, pay later users have experienced issues like overspending and missing payments.' Don't Miss: —with up to 120% bonus shares—before this Uber-style disruption hits the public markets $100k+ in investable assets? – no cost, no obligation. FICO will include BNPL data on upgraded Score 10 and Score 10 T credit models. It wants the new data to provide lenders with "greater visibility into consumers' repayment behaviors, enabling a more comprehensive view of their credit readiness." FICO Vice President and General Manager of B2B Scores Julie May emphasized the impact on young buyers, noting it will "more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products." Using FICO's Score 10 to roll out the initiative has raised some eyebrows because it won't be included in Score 8, currently the most widely used credit scoring product. In fact, FICO modeling is now up to Score 16 but, like the iPhone, older versions remain broadly popular due to long credit cycles and the need for lenders to invest, train and incorporate newer processes. Trending: Named a TIME Best Invention and Backed by 5,000+ Users, Kara's Air-to-Water Pod Cuts Plastic and Costs — Credit agencies have gathered BNPL loan activity for several years now. But this is a largely unregulated industry and not all payment processors report these transactions. So, a substantial chunk of U.S. lending activity may be missing from current data. FICO's new models will try to fill these gaps but there could be unintended consequences because, according to the survey, nearly one-third of Americans have used the service. Bankrate Senior Industry Analyst Ted Rossman told CNN that young folks with limited credit histories are frequent users, and those most vulnerable to credit downgrades. Given survey results, new models may amplify negative credit scores of those overspending and missing payments. Of course, it's hoped this credit activity will boost scores if debts are paid on time and in promises to aggregate multiple BNPL loans, but dangers abound if old school installment loan scoring seeps into the new models. Its common knowledge that borrowing up to your credit card limit is bad for your score because it signals financial stress. Now consider a young buyer who takes multiple BNPL loans at the same time. With traditional scoring, it looks like the customer is maxing out multiple short-term credit lines, raising all sorts of red flags. Rossman believes that customers who pay their debts promptly should be fine under the new rules, but hedges his bets despite FICO assurances. "Things like frequent opening and closing of accounts would be disastrous for your credit score," he told CNN. "With Buy Now, Pay Later, you're doing that every few weeks or even every few days." Read Next: Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die." Image: Shutterstock UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets. Get the latest stock analysis from Benzinga? FAIR ISAAC (FICO): Free Stock Analysis Report This article FICO To Roll Out New Scores to Reflect Your "Buy Now, Pay Later" Habits, Impacting Millions of Americans' Credit originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved.

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