Fact Check: "Average BNPL loan is just $135, unlikely to change credit scores significantly."
What We Know
The claim that the average Buy Now, Pay Later (BNPL) loan is $135 is supported by data from a report by the Consumer Financial Protection Bureau (CFPB). According to the report, the average individual order value financed by a BNPL loan in 2021 was indeed $135, which reflects an increase from $121 in 2020 (source-4).
Furthermore, the impact of BNPL loans on credit scores is nuanced. The CFPB report indicates that while BNPL loans are often not reported to credit bureaus, they can still affect credit scores indirectly. For example, if a borrower misses payments and incurs late fees, this can lead to negative credit reporting if the debt is sent to collections (source-6).
Analysis
The assertion that a $135 loan is "unlikely to change credit scores significantly" requires a deeper examination. While the average loan amount is indeed low, the potential for impacting credit scores is not solely determined by the loan amount. The CFPB's findings suggest that a significant portion of BNPL users may experience consequences if they fail to manage their payments effectively. In 2021, 10.5% of borrowers were charged at least one late fee, which is an increase from the previous year (source-4).
Moreover, the context of the borrower's overall credit behavior is crucial. Users of BNPL services often have credit scores that are comparable to those of consumers using traditional credit cards, which carry high-interest rates. This suggests that while the individual loan amount may be small, the cumulative effect of multiple loans and the borrower's payment behavior could lead to significant changes in credit scores over time (source-6).
In terms of source reliability, the CFPB is a reputable government agency that conducts thorough research and analysis on consumer financial products. However, the interpretation of data can vary, and the implications of BNPL loans on credit scores may differ among individual borrowers based on their unique financial situations.
Conclusion
Needs Research. While the average BNPL loan amount of $135 is accurate, the claim that it is unlikely to change credit scores significantly is overly simplistic. The impact of BNPL loans on credit scores can vary based on individual payment behaviors and the broader context of a borrower's financial history. More comprehensive research is needed to fully understand the long-term implications of BNPL loans on consumer credit.
Sources
- PDF Buy Now, Pay Later: Market trends and consumer impacts. Consumer Financial Protection Bureau
- PDF Consumer Use of Buy Now, Pay Later. Consumer Financial Protection Bureau
