You can use” Buy Now, Pay Later” for almost anything right now, from Costco purchases to DoorDash ( though that doesn’t mean you should ). According to Capital One’s study, about 86.5 million persons used BNPL in 2024. However, the one thing BNPL don’t perform was raise your credit score. Most BNPL companies don’t document on-time payments to credit bureaus, despite Experian and TransUnion reporting on some of Affirm’s programs. That might change after this month, though.

FICO, one of the two main credit scoring systems, unveiled its new FICO Score 10 BNPL and FICO Score 10 T BNPL scoring systems, which will then acquire BNPL ideas into account when creating credit ratings. The new scoring schemes are expected to be released in the slide.

There are a few reasons why it took a while for BNPL to appear on your credit information. BNPL ideas are essentially loans, but they operate similarly to revolving balances, which makes them difficult to estimate. They also make it easier to qualify for, bundle, and paid off, which makes them problematic for existing scoring systems when determining accounts era and credit usage.

How are these short-term funding being handled by the new models, and how this could improve or decrease your credit score.

How FICO did evaluate BNPL programs

You’ll get two scores when BNPL plans arrive on your credit report, one based on the new FICO model and the other based on the updated BNPL calculations. Without significantly altering the older versions, this provides more information for borrowers to take into account when evaluating loans. Nevertheless, it remains to be seen whether these novel scoring systems help or hinder them.

According to John Ulzheimer, a record expert who was formerly with FICO, Equifax, Credit.com, and the founder of creditexpertwitness.com, FICO’s existing scores may have considered each fresh BNPL as a new account. Your average account age, which accounts for 15 % of your credit score, could be affected because BNPL plans typically only last a few months.

Therefore, having too many recently opened accounts could lower your score, he said.

However, Ulzheimer claimed that FICO has discovered a way to not treat each fresh BNPL as its own product in light of these new credit scores, which may help lessen the harm. You don’t notice a drop in credit score if you stack various BNPL balances, as long as you make the necessary payments.

” Installation debt is about mild to results, as long as it’s being paid on time. Therefore, I wouldn’t be concerned about product amounts, particularly those for BNPL, which are typically quite low,” Ulzheimer continued.

How much until something makes a difference?

These updated results may be released in the slide, but it will probably take even more time before we can observe widespread adoption.

According to Ulzheimer,” It takes years for novel scoring systems to become popular,” so I don’t anticipate seeing widespread adoption by lenders right away. That would be generally untypical. And of course, only those who are concerned about how BNPL mortgages are handled in FICO results may be interested in these new designs.

Does this alter how BNPL programs should be used?

No really, unless you’re making late payments and stacking up too much debt. The most crucial thing to have is the ability to properly manage your debt, which includes no spending money you won’t be able to repay in time, like most loans and other funds products. The new ranking models don’t have a negative impact on your income as long as you’re doing that.