How Buy Now Pay Later Is Reshaping Your Credit Score

Your shopping habits could soon tell a very different story about your financial health. Buy now pay later services have quietly expanded to influence credit scoring, marking a significant shift in how lenders evaluate creditworthiness. This transformation raises important questions about whether this accessibility truly benefits consumers or primarily serves the interests of financial institutions.

FICO’s New Model Brings BNPL Into Credit Scoring

Fair Isaac Corp. recently introduced a groundbreaking update to its widely-used credit evaluation system. The company unveiled FICO Score 10 BNPL and FICO Score 10 T BNPL, the first iteration of its scoring models to incorporate buy now pay later activity. These new scoring models became available to lenders throughout 2025 without additional licensing fees, though the three major credit reporting agencies—Experian, Equifax, and TransUnion—maintained control over consumer access to this information.

The development emerged from an extensive training dataset involving over 500,000 BNPL participants, conducted in partnership with major fintech provider Affirm. FICO’s approach treats installment payment services fundamentally differently than traditional credit cards. Rather than viewing multiple BNPL transactions as risky credit-seeking behavior, the algorithm groups them together to create a more comprehensive financial picture. Early testing revealed an interesting pattern: consumers maintaining five or more Affirm accounts actually experienced score improvements or stability, provided all payments remained current. This nuanced approach attempts to reflect how modern consumers actually manage their finances across multiple platforms.

The Explosive Growth of Buy Now Pay Later

The buy now pay later phenomenon represents one of the fastest-growing segments in consumer finance. Beginning in 2019, companies like Affirm, Klarna, and PayPal introduced a simplified financing model that fractured single purchases into bite-sized installment payments at checkout—frequently with interest rates hovering near zero percent. The pandemic era accelerated this expansion dramatically.

These platforms operate on a fundamentally different revenue model than traditional lenders. Instead of primarily earning through consumer interest charges, BNPL companies generate income by collecting fees from retailers for the privilege of offering installment checkout options. This arrangement simultaneously increases merchant sales while keeping consumer barriers minimal. The appeal is undeniable: instant approval decisions, zero late fees, and payment terms substantially friendlier than conventional credit cards created a compelling alternative for millions of shoppers. According to recent data, approximately 130 million U.S. consumers had utilized a BNPL service within the past year alone.

However, this growth occurred largely outside the traditional credit system. BNPL transactions historically vanished from credit reports entirely, creating an information blind spot for lenders. Industry participants growing increasingly uneasy about this gap recognized a critical problem: borrowers could accumulate numerous short-term obligations completely invisible to creditors assessing overall financial risk. That isolation is changing. By mid-2025, Affirm began transmitting comprehensive data on all its lending products—including its increasingly popular “Pay in 4” offering—directly to Experian, representing a deliberate move toward what the bureaus characterized as enhanced market transparency.

Who’s Really Benefiting From Credit Score Changes?

The financial profile of typical BNPL users presents a more complex reality than marketing materials suggest. Research from the Consumer Financial Protection Bureau revealed that buy now pay later consumers predominantly occupy financially precarious positions, predominantly classified within “subprime” or “deep subprime” categories, with credit scores ranging between 300 and 619. These individuals typically lack eligibility for standard personal loan products.

The behavior patterns within this population reveal substantial reliance on installment services. Average BNPL borrowers initiate more than nine transactions annually, with 63 percent simultaneously carrying multiple active loans. The median transaction size hovers around $140—not large sums, yet collectively representing meaningful portions of vulnerable household budgets.

Credit bureaus promote these reporting changes as benefiting “credit invisible” consumers—approximately 25 million Americans, disproportionately representing low-income earners and communities of color—who operate without any credit history whatsoever. Without established credit files, these individuals struggle securing basic financial products including credit cards, mortgages, and traditional financing. Yet the CFPB data suggests a curious disconnect: merely 4 percent of BNPL users actually qualify as credit invisible, implying that the vast majority already maintained credit files prior to buy now pay later adoption. This finding complicates claims that these reporting changes primarily serve credit-underserved populations.

Buy Now Pay Later vs. Traditional Credit: Making the Smarter Choice

Legal experts increasingly express reservations about wholesale BNPL adoption. Chi Chi Wu, senior attorney at the nonprofit National Consumer Law Center, offers straightforward guidance: when facing the decision between buy now pay later and credit cards for the same purchase, choose the credit card. The distinction matters significantly.

Credit card transactions carry federal dispute protections—consumers can contest charges if merchandise arrives damaged, services go unfulfilled, or fraud occurs. Buy now pay later transactions carry no such safeguards. Additionally, Wu observes that credit bureaus themselves emerge as the primary beneficiaries of expanded BNPL reporting. Their fundamental business model depends on accumulating data; greater data volume directly translates to expanded power and influence.

The broader calculus remains consistent: avoid purchases you cannot comfortably afford outright. If spending requires financing regardless of mechanism, conventional credit cards provide superior consumer protections despite their higher interest rates. Buy now pay later’s appeal—frictionless financing and minimal approval barriers—represents exactly the characteristics that created the financial precarity many users already experience.

The integration of buy now pay later data into credit scores reflects the broader digitization of personal finance, yet simultaneously raises fundamental questions about whose interests this modernization truly serves. Consumer awareness regarding these systems remains essential for navigating this evolving landscape.