FICO To Incorporate Buy-Now-Pay-Later Loans Into Credit Scores (axios.com)
- Reference: 0178152699
- News link: https://news.slashdot.org/story/25/06/23/1823245/fico-to-incorporate-buy-now-pay-later-loans-into-credit-scores
- Source link: https://www.axios.com/2025/06/23/fico-credit-scores-bnpl-buy-now-pay-later
> With over 90 million Americans expected to use BNPL for purchases this year, critics argue that existing credit scores paint an incomplete picture of an individual's ability to pay back loans. Fair Isaac Corp., which runs FICO, said Monday that it will launch two separate credit scores including BNPL data.
>
> FICO Score 10 BNPL and FICO Score 10 T BNPL will "represent a significant advancement in credit scoring, accounting for the growing importance of BNPL loans in the U.S. credit ecosystem," the company said in a statement. "These scores provide lenders with greater visibility into consumers' repayment behaviors, enabling a more comprehensive view of their credit readiness which ultimately improves the lending experience," FICO added.
[1] https://www.axios.com/2025/06/23/fico-credit-scores-bnpl-buy-now-pay-later
"Buy now, pay later" (Score:3)
This describes a credit card, exactly.
Re: (Score:2)
No it's not. You're talking about the "Rent-to-Own" industry (Aaron's, Rent-a-Center, etc). This is about the "quick finance" people where you're on a product page online and instead of paying the amount you're offered the ability to break it up into four or more payments, and there's little or no interest. Affirm is one of the players here -- they are even mentioned by name in TFA. Paypal also offers this option when you use PayPal checkout.
Re: (Score:2)
It also existed up into the 90s at major retailers as "Layaway" Only difference is you didn't get the immediate satisfaction of having the item. The store held onto it in the back room till you paid off what you owe on it. Then store credit cards and general credit cards became ubiquitous and Layaway departments disappeared because people just put their wants on plastic for the immediate satisfaction. I really never understood the point of layaway since you couldn't have the item for immediate use. Wouldn'
Re: "Buy now, pay later" (Score:2)
I don't understand the culture of "let's buy stuff, promise to pay it off, then cry foul when the bill is due!" Medical debt is one thing because you were stuck between a rock and a hard spot, but...a couch? an iphone? And these guys aren't exactly loan sharks. They're not going to cut off your thumbs. They'll send you some strongly worded letters, maybe call you, maybe garnish your pay (though generally not worth the trouble for debts this small) and that's about it. You're going to have a harder time borr
Regarding penaties in ancient times (Score:2)
From: https://mankatobankruptcy.com/2018/02/06/debt-punishment-st-peter/
A few of the most notorious punishments for debtors in history include:
Debt Slavery Laws: Up until 326 BCE, “debt slavery” in Rome and Greece was a common practice. Because there was no option for bankruptcy, debtors would instead pledge their labor as a security interest on loans. Creditors could take advantage of this security pledge and keep debtors in a slave-like internment until they could
Re: (Score:2)
The thing that worries me is BNPL for recurrent payments like groceries. Klarna allows you to split a bill from Asda, a supermarket in the UK, into three payments. If you have to delay payments on your groceries, you definitely are not financially healthy or your priorities are not in the right order. Waiting for Klarna to go bankrupt is not an option, it is a bet.
Re: "Buy now, pay later" (Score:2)
Not loans. Loan sharks.
Predatory.
Re: (Score:2)
Not always. I bought a pricey e-bike on Amazon with their buy now pay later option. I had the cash in the bank to pay for it outright, but Amazon basically offered me a 0% interest loan for 6 months, why not take advantage of it?
It's still predatory (Score:2)
They sell your information in your credit application. And you run a small risk that the company is just bad at figuring out how to handle autopay options and will end up charging you one late fee and possibly removing the 0% rate and kicking you back up to the 19.5% default rate the offer has in the fine print.
Re: (Score:2)
That's not entirely accurate. That is a revenue source in some models, but it's emerging and the value of market data, while valuable, may not be the biggest source of revenue for a BNPL lender.
No, the biggest source of BNPL revenue is merchant fees, which start at 2% and go as high as 8%, much higher than credit cards which range from 1 to 3%. The stores like these because they have clearly demonstrated that they can boost sales, and will take the merchant fee hit if their sales go up by 15-20%, and a
Re: "Buy now, pay later" (Score:2)
If you're going to use the money they loan you to invest, then there's a good reason to do it. If not then you're just creating the chance of defaulting by accident, which is a good reason why not.
Re: (Score:2)
I wouldn't even say it needs to be used to invest being that most BNPL plans are 4-6months. Assuming you actually have the cash to buy it in full in your account already and are just using it for the "Free Loan" then as long as you don't spend the cash in your account and keep it there for an emergency then the only way you can default on it is if you had an emergency that you had to spend the money.
Really? (Score:5, Insightful)
I'm honestly shocked that existing credit scores don't take BNPL loans into account. The one time I bought a piece of furniture on credit, that ended up on my credit report. Why wouldn't other forms of consumer credit be included?
Re: (Score:2)
Because the industry crept up outside of the traditional lending environment.
They wouldn't formally check your credit, and would report it unless you defaulted. The idea being that small short term loans would be pretty secure and the money in theory was to be made on fees to merchants (the pitch was that by making checkout easier they could increase sales for a merchant and get a few percent cut (effectively getting 18% APR (3% on 2 months)).
In an effort to grow they started being available everywhere for
Re: (Score:2)
If you're using BNPL on door dash, you really should probably be rethinking your priorities and instead going to the grocery store and cooking your own food at home.
Re: (Score:2)
I don't disagree.
I was absolutely appalled the first time I ordered pizza and it suggested affirm.
But I also know that if I were to lend someone money I'd absolutely want to know they were doing that (or more accurately make sure they weren't doing it).
This is also what Moody's does (Score:1)
The "big three" credit rating companies - in particular [1]Moody's [wikipedia.org] - do this for company bonds and bonds issued by countries. Vaguely relevant because the USA was downrated a month ago, an indication that they are buying on credit.
[1] https://en.wikipedia.org/wiki/Moody's_Ratings
Re: (Score:2)
The US is 36 trillion dollars in debt, mostly to Communist China. In any sane place, that's called "bankrupt".
Re: This is also what Moody's does (Score:3)
As the saying goes, if you owe the bank a thousand you have a problem, but if you owe the bank ten million the bank has the problem. Perhaps we should update it to account for inflation.
Re: (Score:3)
The US is 36 trillion dollars in debt, mostly to Communist China.
Japan is the [1]largest buyer of U.S. debt [reuters.com]. China is second.
[1] https://www.reuters.com/markets/us/who-owns-us-debt-2025-02-10/
Re: (Score:3)
Mostly as is 2%?
Re: (Score:3)
MAGA MATH!!!
Re: (Score:2)
Foreign investors only account for a quarter of the $36T of federal debt. China's piece is the biggest of that foreign debt, but it's not anywhere near half so fails to meet the definition of "mostly".
More than half is held by US investment firms and individuals. That means mostly the federal government owes US citizens and US businesses a LOT of money. A default would wipe out millions of people financially, to a degree that we'd have a cascade of mortgage defaults that would be a second punch to our econo
Re: (Score:2)
(update) I looked up some data from 2024. It seems that China and Japan have traded places on owning US debt.
Re: (Score:2)
> In any sane place, that's called "bankrupt".
In any sane place its called business as usual. The only question is whether you can service that much debt and the United States is nowhere close to that and its still a long way below its taxing capacity.
How America improves their ratings. (Score:2)
> Vaguely relevant because the USA was downrated a month ago, an indication that they are buying on credit.
Directly relevant because the USA is loaning credit out to those who shouldn’t have it.
I’m guessing the USA will improve their ratings once the banks carrying $100M+ in BNPL debt start giving those they have loaned to their just desserts in the form of 20%+ interest rates and sub-500 credit scores for the next few years.
Not even gonna apologize for being that direct about the consequences either. The fucking arrogance steaming from the ignorant masses racking up debt with zero consequence needs
Rightly so. (Score:2)
Using any kind of BNPL indicates a major risk. And it's not even about living paycheck to paycheck or whether BNPL amount gets paid back on time or not. Using BNPL indicates that the person has major gaps in financial education, doesn't understand how predatory BNPL schemes and their rates are and therefore using these services makes a BNPL customer a high risk customer overall.
Re: (Score:1)
Yeah someone with major gaps in their financial education would pay cash for something when they're being offered 0% 0-fee financing. Time value works in both directions.
Re: (Score:2)
> Yeah someone with major gaps in their financial education would pay cash for something when they're being offered 0% 0-fee financing. Time value works in both directions
For anyone who is good at finances and not credit card debt its a no-brainer. But there are a bunch of people who think debt is evil. They don't understand how to manage their money so they believe various influencers who tell them debt is evil.
These companies make money through fees paid by the merchant. Its a marketing tool. But that does not mean people can't get themselves into financial trouble with them if they can't make the payments. If you are a traditional lender, you want to account for that ris
Re: (Score:2)
Not all buy now pay later "loans" are predatory. It's about reading the fine print. I was on the market for an e-bike. Had the cash in the bank to pay for it outright but amazon offered buy now pay over 6 months 0% interest, no fees, Just total price divided by 6 and they auto debit your card every month till it's paid off. Why the hell wouldn't you take advantage of a 0% interest loan for 6 months and keep your liquid cash in the bank?
Re: (Score:2)
Unfortunately I don't think Amazon directly offers the buy now pay later administered by Amazon itself anymore. I still occasionally see BNPL offered on pricier items provided by a 3rd party BNPL administrator like Klarna or Afirm, etc. I'm guessing Amazon didn't want to deal with the hassle of BNPL themselves any more, maybe too many people were defaulting?
Re: Rightly so. (Score:2)
Because you get used to it, keep getting multiple agreements, until you've got so many running in parallel, racking up interest, that it becomes unmanageable and you start running into arrears.
Re: (Score:2)
Yes this can be a problem if you're doing BNPL for items under a couple hundred bucks or running multiple in parallel. In my case it was a one time thing for a purchase over $1k and essentially a no fee, 0% interest loan for 6 months keeping my cash liquid in my bank account for another purchase or emergency. In the end I could have just bought it outright. I wasn't using BNPL because I didn't have the cash to pay it in a lump sum.
Re: (Score:2)
> Because you get used to it, keep getting multiple agreements, until you've got so many running in parallel, racking up interest, that it becomes unmanageable and you start running into arrears.
You've got the order of operations mixed up. You would first have to go into arrears for it to rack up interest, it will not rack up interest unless you go into arrears. That's precisely what is appealing about them, and what differentiates them from predatory loans, like pay-day loans, which can incur an interest rate of 400% from the minute you take it out.
Affirm And FICO Sitting In A Tree... (Score:2)
What is Affirm’s revenue model and how does it make money?
Affirm’s success is fundamentally aligned with consumers and merchants as we win when they win. The diversity of our business model is also a key area of strength for Affirm as we earn revenue through five primary channels.
1. We generally earn revenue from merchants when we help them facilitate a transaction. This is commonly referred to as our merchant discount rate.
2. Affirm generates revenue through the simple interest-bearing loan
Oh Lord, (Score:2)
Won't you buy me
a color TV.
Dialing for Dollars
is trying to find me.
We need to educate people that BNPL is bad (Score:2)
for your financial health.
This could be done by following what we did to reduce the number of smokers in the 60s-80s:
1. Incorporating mandatory financial literacy classes into the High school Curriculum.
2. "Black Box" warnings when signing up and after each use of BNPL. (https://www.medicalnewstoday.com/articles/boxed-warnings)
3. Sin tax: Making the transaction fee charged to the merchant paid for as a surcharge added in to the total cost at checkout.
4. Ban on advertising BNPL in the media.
Yes I know, some
Friendly Reminder (Score:2)
Credit scores are completely made up and inherently racist.
Coincidence this is timed with increased defaults? (Score:5, Informative)
It was widely reported in financial press that BNPL (buy now pay later) [1]defaults rates increased [finance-commerce.com]. I don't think it is coincidence that these will factor into one's credit score.
[1] https://finance-commerce.com/2025/05/klarna-bnpl-loan-defaults-rise/
As they should (Score:3)
I assumed it already was considered, and counted negatively as a low-quality debt.
Re: As they should (Score:2)
I don't know about quality, but on my file there is a separate section for so-called "short-term debt". A mortgage on a house or loan for a car are not the same as paying your car insurance monthly or buying a phone over 12/18/24 months. Those things are fine, but as other posters have mentioned someone who has had lots of payday loans is probably a risk.
Re: As they should (Score:3)
I think even one payday loan is a huge red flag. Anybody who uses those has a serious lack of sound judgement.
Re: (Score:2)
I assume that's almost definitely the case.
But also the fact that they are getting very popular.
I'd want to know if a potential customer has $1500 in BNPL for $750/month minimum payment before I left them money.