Buy now, pay later loans will now affect US credit scores – what does that mean for consumers? | Buy now, pay later

Now a new change to purchase means paying later loans, borrowers’ credit scores can see a change that is concerned about some users of loans.

Las 31 -year -old Las Vegas, who uses BNPL and shares that he has no big loan, said Nicole Nitta, “I feel that I can’t access spending power and zero or really low APR rates.”

FICO is a credit scoring company used by most US loans, Announced on June 23 They will include BNPL loans that “play an increasingly role in the financial lives of consumers to assist the“ loan preparation more accurately ”.

For users of companies To approve– Later And KlarnaThe new calculation can benefit them because they allow them to create their loans – if they pay back the loans on time.

Nitta first used BNPL for foundations such as food that could not be broken in 2021. He said that he was unemployed and that he lived in basically savings ”.

Now, Nitta, who works as an office manager for a special therapy application and works on marriage and family therapy, is financially more stable, but has an important student loan debt. Since then, when he moved BNPL to a new apartment, he used Christmas gifts and dishwashing, but he said he always made payments on time.

Ted Rossman, a senior industrial analyst on the Bankrate Finance site, says: “If you are using purchase now, then pay in a responsible way”, “I discuss [the change] It should help you as a step stone to increase your loan and perhaps help you get your first credit card or car loan.

“The main disadvantage is that if you pay late or you borrow too much because I can say that it is a fair result, because this is on credit cards and other products,” he added.

Companies such as form, Afterpay and Klarna have been established more than a decade ago, but its use has expanded significantly during COVİD-19 pandemia. These companies provided $ 180 million with a total of more than $ 24 billion loans in 2021, which provided almost ten times an increase in 2019. Consumer Financial Protection Office.

Fumiko Hayashi, who conducted economic research on payments at Kansas City Federal Reserve Bank, said that the change was due to a transition from purchasing to online purchases in stores in addition to an economic decline during pandemic.

A Typical BNPL loan It allows consumers to allocate a $ 50 to $ 1,000 purchasing process into four interest -free installments. If a debtor does not make the necessary payments, the lender will receive a late fee for them. Layers also receive trading fees for traders.

BNPL is the most popular among people aged 33 years and under the age of 33 years representing 70% of such loans in 2022. Financial protection office.

Hayashi stated that a disadvantage for young users is “if they do not use credit cards if they continue to use BNPL, they cannot create a credit history”. With the change of FICO, using BNPL in a responsible way may be useful for some young users who have never had any credit history before – but less for those who are not responsible.

For most users, FICO and Promotion produced higher scores, including BNPL data in credit reports. report He looked at 500,000 consumers in February.

Nevertheless, there are people who can get hurt by FICO using BNPL data. People with sub-premium or deep sub-prime credit scores obtained more than 60% of new BNPL loans from 2021 to 2022. Financial protection office.

And 24% of the BNPL borrowers were paying in 2024 with an increase of 6% compared to the previous year. Federal reserve. Among the people who earned $ 25,000 or less increased from 31% to 40%.

In particular, BNPL access “significantly reduces the sensitivity of expenditures according to income”, Harvard Business School Report.

“This effect is concentrated among individuals who are likely to restrict liquidity, especially users with low -income users and users without credit cards,” he said.

Becca, a 26 -year -old technology worker who refused to use his surname in New York, said he used BNPL for more expensive beauty products, including Chanel perfume. He said that he could spend $ 80 on this month and pay two separate $ 40 and pay the rest of the next month ”.

Even though the payment option helps him, he’s worried about companies like Doordash. Pizza Delivery.

“It encourages bad spending behaviors from young people,” Becca said. “All these items accumulate because you use it over and over again. You don’t feel like you spend a lot of money.”

Rossman may take some time for the economy to feel the impact of the new credit score calculation. FICO said it will make new scores available in the autumn of 2025, Most lenders continue To use a credit score model since 2009 (despite FICO since release new versions).

“Change is relatively slow in the world of credit scoring, so even if it is present in the autumn, it does not mean that everyone will use it right away,” Rossman said.

“This is like a kind of phone. For example, Apple has iPhone 16, but many people still use 15 or 14 or even the old model. Credit scoring works the same way.”