You might frequently see one kind of offer with online shopping: Buy it now and pay for it later. No interest!
These Buy Now Pay Later (BNPL) offers are popular and, until now, they didn't hit your credit report or affect your credit score.
That is changing.
Fair Isaac Corp., the company that makes the FICO credit score, has announced it will now offer lenders a credit score that does count BNPL.
BNPL loans became well-known in 2019 when lenders began to offer these small installment loans to retailers for a fee. These BNPL loans, which average $140, boost sales and are frequently offered to buyers at no interest. The small loans are approved nearly instantly and, until now, haven't been reported on credit reports. So, someone applying for a mortgage, for example, could have a number of BNPL loans totaling a few thousand dollars and the lender wouldn't know.
According to Money.com, about 130 million U.S. consumer have taken a BNPL loan in the past year. According to the Consumer Financial Protection Bureau (CFPB), people who use this type of loan are generally too financially vulnerable to get a personal loan. Their credit scores are in the 300 to 619 range. Reporting these small loans could actually help people who have no credit history, if payments are made on time.
