In recent years “Buy Now, Pay Later” (BNPL) services have become a very popular way for people to shop online. These services let you buy something today and pay for it in smaller installments later often without any interest. It sounds great and for many shoppers it has been! But now there’s a new development that could change how these services affect your financial life.
Starting soon FICO (the company behind one of the most important credit scores in the U.S.) will include BNPL loans in its credit scoring system. This means the way you use these payment plans could impact your credit score—for better or worse.
What is Buy Now, Pay Later?
Buy Now, Pay Later (BNPL) is a type of short-term loan. It allows shoppers to split the cost of a purchase into multiple payments usually over a few weeks or months. Some of the most popular BNPL companies are:
- Afterpay
- Klarna
- Affirm
- PayPal Pay in 4
- Zip
Many of these services don’t charge interest or fees if you pay on time. That’s why they’ve become especially popular with:
- Young people who may not yet have credit cards
- People with low to moderate incomes
- Shoppers who want to avoid interest charges
Why Are BNPL Loans Becoming a Credit Score Factor?
Until now most BNPL loans did not appear on your credit report. That means they had no impact on your credit score positive or negative. But credit agencies and lenders realized this created a blind spot. People were taking on multiple BNPL loans sometimes struggling to keep up with payments but this debt was not being reported.
FICO recently announced that they will start factoring in BNPL loans in a new version of their credit score model (called FICO Score 10T). This move is meant to give lenders a fuller picture of a person’s borrowing habits and risk.
How Will This Affect Your Credit Score?
The impact of BNPL loans on your credit score will depend on how you manage them:
✅ If You Pay on Time:
- BNPL loans could help your credit score.
- Making payments on time shows lenders that you are responsible with money.
- It could help people who have little or no credit history build their credit.
❌ If You Miss Payments:
- BNPL loans could hurt your credit score.
- Late payments, defaults, or collections will now be reported.
- This could make it harder to get approved for credit cards, loans, or even rentals.
Who Will Be Affected Most?
BNPL is most popular with younger adults, especially Gen Z and Millennials. According to recent surveys:
- Over 50% of Gen Z shoppers have used BNPL.
- Many use BNPL for clothing, electronics, beauty products, and even groceries.
- People with lower incomes use BNPL as a way to afford things they can’t pay for all at once.
These are the groups who may see the biggest impact from this new credit reporting change—both positively and negatively.
What Are the Benefits of BNPL Being Added to Credit Scores?
There are some clear advantages to this move:
- Credit Building Opportunity:
If you have little or no credit history, using BNPL responsibly could help you build a score. - Greater Transparency for Lenders:
Banks and lenders will now have a clearer picture of your debts, which can help them make fairer decisions. - Improved Financial Habits:
Knowing that BNPL will affect your credit might encourage people to pay more attention to their budgets and payment timelines.
What Are the Risks?
While there are benefits, there are also risks you should be aware of:
- Overuse of BNPL:
It’s easy to say yes to multiple small payments. But too many BNPL loans can add up quickly, and now they will all appear on your credit report. - Missed Payments:
If you’re late or miss a payment, it could harm your credit for years. - Confusing Terms:
Different BNPL providers have different rules. Some report to credit bureaus; others don’t. Some charge late fees; others don’t. It’s easy to lose track.
How to Use BNPL Safely (and Boost Your Credit)
If you’re going to use BNPL, here are a few tips to make sure it helps—not hurts—your credit score:
- Only use BNPL when you can afford the full amount. Think of it as a convenience, not a way to buy things you can’t afford.
- Stick to one BNPL provider at a time. Don’t juggle too many loans across platforms.
- Set reminders for due dates. Missing even one payment could lower your score.
- Check if your provider reports to credit bureaus. Not all of them do yet.
- Track your total BNPL debt. Keep a simple list to avoid surprises.
Final Thoughts
The world of personal finance is always changing. The decision to include Buy Now, Pay Later loans in credit scoring is a big one especially for young or first time borrowers. On the one hand it gives people a new opportunity to build their credit without using traditional credit cards. On the other hand it introduces new risks if payments are missed or debt piles up.
Whether you are a frequent BNPL user or considering it for the first time now is a great time to look closely at your spending habits and plan ahead. Credit scores are more important than ever for buying a home, getting a job or securing a loan and every payment counts.
Use BNPL wisely and it could become a helpful tool in your financial journey.