FICO to Include Buy Now, Pay Later Loans in Credit Scores: A Major Shift in Consumer Credit Reporting
The era of “Buy Now, Pay Later” (BNPL) just took a significant turn as FICO, the company behind the widely used credit scoring models, announced that BNPL repayment behaviors will soon influence consumer credit scores. This move is expected to reshape how creditworthiness is evaluated across the U.S., potentially opening doors for millions of consumers—or presenting new financial risks.
A New Scoring Model for a Changing Financial Landscape
FICO has confirmed it will launch two new versions of its credit scores by the end of the year—FICO Score 10 BNPL and FICO Score 10 T BNPL. These updated models will specifically incorporate data from BNPL transactions, providing lenders with deeper insights into how consumers are managing short-term installment loans that have surged in popularity over the past few years.
BNPL services, offered by platforms like Afterpay, Klarna, and Affirm, allow consumers to break up purchases into smaller, interest-free payments over a few weeks or months. Their use has exploded, especially among younger consumers, due to the convenience and the perception of affordability.
Why BNPL Matters More Than Ever
While BNPL services are frequently touted as an easy alternative to credit cards, they haven’t traditionally impacted credit scores. That’s because most BNPL providers don’t report repayment behavior to major credit bureaus like Experian, TransUnion, or Equifax. But as these services become a more prominent fixture in retail spending—especially for essentials like groceries and fuel—regulators and credit agencies alike are paying closer attention.
Now, with FICO preparing to integrate BNPL data, the financial playing field could change dramatically for users.
Credit Building Tool or Risky Trap?
BNPL can serve as a valuable stepping stone for credit-invisible individuals, especially younger adults or those with thin credit files. According to Ted Rossman, a senior credit analyst at Bankrate, “A lot of BNPL users are young people without extensive credit histories. Including BNPL in credit scores could help bring them into the credit system—provided they use it responsibly.”
This means timely repayment of BNPL loans may now actually improve your credit score under the new FICO models, creating opportunities for better loan terms, increased credit limits, and improved financial flexibility.
However, there’s another side to this coin.
Rising Concerns Over Overspending and “Phantom Debt”
Despite the promise of BNPL, consumer finance experts warn that its convenience can be a double-edged sword. A May 2025 survey from Bankrate revealed that nearly 50% of BNPL users faced financial difficulties—most commonly due to overspending. With multiple concurrent BNPL plans, it becomes easier than ever to lose track of total financial obligations.
Even more concerning is the phenomenon of “phantom debt.” Because BNPL loans are often not reported to credit agencies, users might appear to have minimal debt on paper—when in reality, they may be juggling thousands of dollars across multiple BNPL platforms. This lack of visibility makes it harder for lenders to accurately assess financial risk during new credit applications.
Regulatory Gaps Continue to Raise Eyebrows
Despite the explosive growth of the BNPL market, the U.S. has yet to establish firm regulations governing these financial products. Under the Trump administration, efforts by the Consumer Financial Protection Bureau (CFPB) to regulate BNPL firms as credit card issuers were abandoned. As a result, BNPL providers are not subject to many of the mandatory disclosures, consumer protections, or reporting requirements that traditional lenders must follow.
This regulatory void leaves consumers vulnerable, while credit bureaus and lenders operate without a full view of borrowers’ financial obligations.
FICO Takes Initiative Amid Growing Demand
According to Ethan Dornhelm, FICO’s Vice President of Scores and Predictive Analytics, lenders have been asking for a scoring system that reflects BNPL behavior. Dornhelm notes, “A number of the largest lenders in the U.S. told us, loud and clear, that there is a need for a credit scoring model that includes BNPL data.”
But integrating such data isn’t straightforward.
One major challenge is the slow adoption rate of new FICO models. Even though FICO Score 10 was introduced in 2020, many lenders continue using FICO Score 8—or even older versions like Score 2 or 5—particularly in the mortgage industry.
As Rossman puts it, “It’s like smartphones. Just because there’s an iPhone 16 doesn’t mean everyone’s upgraded. Financial institutions can be slow to adopt new technologies, especially when it requires retraining staff and updating systems.”
The Complex Pipeline of Credit Reporting
Before FICO can factor BNPL into scores, data must first flow from BNPL providers to credit bureaus—and not all providers are on board. Companies like Affirm have begun reporting user behavior to Experian and TransUnion, but broader participation remains inconsistent.
This layered process—providers sharing data, bureaus compiling it, and FICO integrating it—means it could be years before the BNPL-inclusive scoring models are fully embedded across the lending ecosystem.
BNPL Requires a Rethink in Scoring Algorithms
FICO also acknowledges that simply shoehorning BNPL data into existing models would misrepresent consumer behavior. That’s because BNPL loans don’t behave like credit cards, mortgages, or car loans.
Through a year-long study conducted in partnership with Affirm, FICO found that BNPL users tend to open multiple short-term loans in rapid succession—a pattern that could appear risky under traditional scoring models. Frequent account openings and quick repayments might lower a consumer’s score unnecessarily.
Instead, FICO’s new models will aggregate BNPL loans and treat them as a distinct category, reflecting their unique nature. This innovative scoring approach will reduce penalization for short-term, responsibly managed BNPL activity—a major win for regular users of these services.
What This Means for Consumers
The inclusion of BNPL in credit scores represents both an opportunity and a challenge. Here’s what consumers need to keep in mind:
✅ Positive Impact:
- On-time payments to BNPL providers can now help build credit history.
- Individuals with limited or no traditional credit lines may benefit from increased visibility.
- BNPL behavior that demonstrates responsible borrowing could result in better loan terms and interest rates.
⚠️ Negative Impact:
- Missed or late BNPL payments may now hurt your score.
- Overusing BNPL—especially across multiple platforms—could signal financial instability.
- Phantom debt might still be a concern if not all BNPL providers report consistently.
Industry-Wide Implications
For lenders, the incorporation of BNPL into credit scores could improve risk prediction and lending accuracy. Banks and financial institutions will have a more comprehensive view of a borrower’s financial obligations, potentially reducing default rates.
However, this shift could also tighten credit availability for some users. If consumers are heavily reliant on BNPL and fall behind on payments, their credit score could suffer—even if they had no previous negative marks on file.
Final Thoughts: A Transformative Step in Credit Scoring
As FICO prepares to roll out its BNPL-inclusive scoring models, the financial world is entering a new era of transparency and complexity. This move marks a significant step toward modernizing credit scoring systems in an age where short-term, digital-first lending is becoming the norm.
Consumers must now treat BNPL like any other credit product—with careful consideration, responsible use, and an awareness that their actions may soon impact more than just their next shopping spree.
As the credit reporting landscape continues to evolve, staying informed—and proactive—will be key to financial wellness in the BNPL age.
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