By Imani Moise
If you buy a pair of shoes or makeup and choose the option to pay later, it could show up on your credit report.
Affirm AFRM 0.71%increase; green up pointing triangle, one of the largest “buy now, pay later” lenders, on Tuesday will begin furnishing all new loans to Experian EXPN 0.39%increase; green up pointing triangle, similar to how a mortgage or car loan shows up on your credit report.
So far, the change to this fast-growing form of consumer debt only applies to Affirm loans and Experian credit reports. But other lenders and credit bureaus may soon follow suit.
TransUnion, for example, has started collecting data from two BNPL providers and says it is working to make the information available to consumers and lenders soon, once it has a more complete data set.
The details
Affirm offers short-term, interest-free loans at checkouts that allow you to buy something and pay for it in four installments over six weeks. Unlike credit-card debt, these “pay in four” loans typically haven’t shown up on credit reports. Now, all new Affirm loans—whether paid on time or late—will appear on credit files. Previously, Affirm only reported longer-term, interest-bearing loans to credit bureaus.
Adding these accounts to reports won’t immediately have an impact on credit scores, since traditional scoring models haven’t yet been updated to include this type of debt. But they may soon, Experian said.
A joint study from FICO and Affirm in February found that 85% of BNPL users saw score changes of fewer than 10 points by adding the accounts to the credit report under a simulated model.
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