Buy Now, Pay Later Loans Will Soon Appear on Credit Reports

If you use buy now, pay later loans, account activity could soon appear on your credit report.

Buy now, pay later (BNPL) loans are increasing in popularity because they offer a convenient way to pay for larger expenses over time. These loans haven't previously been reported on consumer credit reports. But that's about to change.

Buy now, pay later loans are attractive. Some of these loans offer a limited-time 0% interest, while others offer low interest rates. Consumers can pay off the debt in regular installments and spread out the cost of expensive purchases.

Since many BNPL services don't perform a hard credit pull for approval, this is an excellent lending option for people with minimal credit history. It can be more difficult for these consumers to get approved for other financial products, like credit cards.

We conducted a survey to examine the popularity of BNPL services. We found that over half of Americans have used BNPL loans and these services continue to increase in popularity.

Typically, these loans haven't shown up on credit reports. However, all three credit bureaus have recently announced plans to include buy now, pay later payment and account data and activity on consumer credit reports. But this won't be an overnight change.

Here's why BNPL loan data hasn't been reported sooner

BNPL service activity typically hasn't been reported on credit reports because this type of data doesn't fit in well with the current system, which analyzes revolving credit and long-term loans like mortgages and car loans.

Since BNPL services are installment loans, some consumers take out multiple BNPL loans per year. With most current credit models, taking out multiple BNPL loans could be viewed as risky. Because of this, including such activity on credit reports could penalize consumers.

But industry experts believe that consumers should be able to benefit from using BNPL services and have the chance to improve their credit by making responsible choices with these loans. This includes making regular, on-time payments and paying off BNPL loan balances.

While the credit bureaus will soon report this data, they want to take steps to protect consumers from the potential immediate negative credit impact of including such data without first adjusting the current system.

It will take time for the industry to adjust and make room for BNPL loans -- so consumers shouldn't expect instant changes.

What to expect from all three credit bureaus

Eventually, all three credit bureaus will report some BNPL data, but how they handle that data will vary. Here's what we know so far:

Experian

Experian plans to debut its own product, The Buy Now Pay Later Bureau™, in spring 2022. This product will include essential BNPL account data. At first, BNPL data will be stored separately from Experian's core credit bureau data and it can be requested by lenders.

Equifax

During the first quarter of 2022, Equifax will formulate a standard process for including BNPL data in traditional consumer credit reports. This includes implementing a new business industry code used to classify the industry. The long-term plan is to include this data in regular consumer credit reports.

TransUnion

TransUnion recently introduced its own new BNPL credit reporting service, called Point-of-Sale Suite Solutions. The credit bureau will include BNPL data in its reports. This data will appear on a separate portion of credit reports and will be made available to lenders.

What this means for consumers

If you use BNPL services, you can expect relevant data to appear on your credit report sometime soon. While it may not happen right away, it will eventually be a reality.

For consumers who are new to building credit, including BNPL in their credit report could offer a way to establish credit and improve their credit score. But to benefit, consumers will need to make responsible choices like making on-time payments.

No matter what personal finance tools you use, it's important to make smart choices and be cautious. Do your best not to ignore debt, make late payments, or miss payments.

BNPL loans can be beneficial, but they can cause you financial stress if you're not careful. Only take out BNPL loans if you can afford to make regular payments without ignoring your other financial obligations. Always consider how your actions will impact your financial wellbeing.

If you're looking for tips and guidance on how to improve your finances, check out our personal finance resources.