Americans’ use of Buy Now, Pay Later (BNPL) loans could soon affect their credit scores, marking a major shift in how creditworthiness is assessed. FICO, the company behind the widely-used credit scoring models, announced plans to launch new versions of its scores later this year that incorporate BNPL data, offering lenders greater visibility into how consumers manage these popular short-term installment loans.
The new credit scores—FICO Score 10 BNPL and FICO Score 10 T BNPL—are designed to provide a more complete picture of a consumer’s financial behavior by factoring in repayment patterns for BNPL loans. These loans, often used in place of credit cards, allow users to spread out payments over weeks or months, typically with no interest.
Credit Building—or Credit Trouble?
For consumers, particularly younger individuals with limited credit history, the inclusion of BNPL in credit scores could either serve as a stepping stone to stronger credit or become a financial setback.
“A lot of BNPL users are often young people who don’t have long credit histories,” said Ted Rossman, senior credit analyst at Bankrate, in an interview with CNN. “That’s the more optimistic use case—that these people could be brought into the credit system. And if they use Buy Now, Pay Later responsibly, it should help them.”
BNPL has become increasingly integrated into everyday shopping habits, especially among Gen Z and Millennials. These services are often seen as flexible alternatives to credit cards, particularly for those who want to avoid traditional interest charges.
Overspending and ‘Phantom Debt’ Concerns
However, the convenience of BNPL has also raised alarms. According to a Bankrate survey conducted in May, nearly half of BNPL users have encountered problems, with overspending being the most common issue. The ease of splitting payments can lead consumers to overextend themselves—especially when managing multiple BNPL loans simultaneously.
Consumer advocates and economists have also voiced concern about BNPL usage for essentials like groceries, reflecting a deeper reliance on short-term borrowing to meet daily needs.
Another growing issue is the proliferation of what experts are calling “phantom debt.” Since most BNPL providers don’t report activity to credit bureaus, this form of debt remains largely invisible to traditional credit tracking systems. As a result, lenders have little insight into consumers’ actual liabilities when assessing new loan applications.
Regulatory Loopholes and Lack of Oversight
Despite its rapid growth, the BNPL industry remains largely unregulated in the U.S. The Consumer Financial Protection Bureau (CFPB), under the Trump administration, abandoned an initiative proposed during the Biden administration to regulate BNPL providers as credit card companies.
This regulatory gap has allowed BNPL companies to avoid many of the standard reporting obligations traditional lenders must follow. As a result, credit agencies have been left with a blind spot, unable to track repayment behavior or assess risks accurately.
FICO Steps In to Fill the Data Void
FICO’s new scoring models aim to close that gap by factoring in BNPL data where available. “A number of the largest lenders in the US told us, loud and clear, there is a need for a credit scoring model that includes the BNPL data,” said Ethan Dornhelm, vice president of FICO Scores and Predictive Analytics.
However, integrating BNPL data into credit scoring is no simple task. Not all lenders use the same FICO score models, and adoption of new versions can be slow. For example, while FICO Score 10 and 10 T are the latest versions, many lenders still use older models like FICO Score 8 or even versions 2, 4, and 5 in the mortgage sector.
“It’s kind of like an iPhone—just because they’re up to version 16 now, some people are still using old ones,” Rossman said. “Lenders are sometimes hesitant to invest in the technology and train staff to implement new processes.”
A Complex Credit Ecosystem
The rollout of BNPL-inclusive credit scores is further complicated by the multi-tiered nature of credit reporting. Lenders must first report data to credit bureaus, which in turn supply that data to FICO. Only then can the scoring models process the information.
Some BNPL providers, like Affirm, have started reporting data to agencies such as Experian and TransUnion. But widespread participation is still lacking, limiting the effectiveness of new models for now.
“You’ve got multiple levels to this,” Rossman explained. “The lenders furnish the information, the bureaus compile it, and then FICO applies its methodology. It’s hard to get everyone on the same page.”
BNPL’s Unique Behavior Requires a New Scoring Approach
Traditional credit scoring models aren’t well-equipped to handle the distinct patterns of BNPL usage. Frequent account openings and rapid repayment cycles—common in BNPL transactions—could negatively affect scores under legacy models, even when consumers are managing their debts responsibly.
FICO acknowledged this and opted to develop a “novel” approach. Rather than force BNPL data into existing models, the company conducted a year-long joint study with Affirm to better understand the unique nature of pay-over-time loans.
“Simply forcing the BNPL data into our existing FICO scores, which weren’t calibrated to this new type of credit product, was not the answer,” Dornhelm noted.
One key insight from the study: BNPL users often open multiple loans in a short period, behavior not typically seen with mortgages or student loans. To avoid penalizing this trend, FICO’s new models aggregate BNPL loans into broader categories when calculating creditworthiness.
