FICO, the company whose scores dominate consumer lending, will begin incorporating "buy now, pay later" payment history into its credit-scoring models this fall. The two new scores, FICO Score 10 BNPL and FICO Score 10 T BNPL, aim to give lenders a more complete financial picture as the use of installment loans explodes.
The $116 billion blind spot: BNPL has grown from a niche financing option to a massive industry, with Americans purchasing over $116 billion in goods using these services in 2023. Until now, this mountain of short-term debt has been largely invisible to the traditional credit system, obscuring a person's true financial obligations from lenders.
Now it all counts: The new models won't immediately replace existing scores but will be offered alongside them, letting lenders test-drive the new data. For consumers, the change means on-time BNPL payments could help build a credit history, while missed payments could ding their FICO score for the first time. The move follows groundwork by the major credit bureaus, with Affirm already reporting its loan data.
The credit-crunch connection: The change addresses a reality highlighted by the Consumer Financial Protection Bureau: consumers often turn to BNPL when their traditional credit is tight, making it a crucial, yet formerly hidden, part of their financial lives.
The bottom line: For better or worse, the era of BNPL operating completely outside the traditional credit system is over. These small, seemingly casual debts are about to become a formal part of your permanent financial record.
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The wider view: FICO's move comes as regulators push for BNPL providers to be treated more like credit card companies, with similar consumer protections. The expansion of these services into everyday essentials like food delivery from DoorDash is also accelerating, highlighting a broader consumer credit stress seen in other areas, such as the highest rate of late car payments in over 30 years.
