Fact Check: "FICO's new model will impact credit scores for millions of Americans."
What We Know
FICO, the company that provides credit scores used by approximately 90% of U.S. lenders, announced that it will begin incorporating "buy now, pay later" (BNPL) loan histories into its scoring models starting in the fall of 2025. This decision comes in response to the growing popularity of BNPL loans, which have surged from $2 billion in 2019 to over $116 billion in 2023, according to Capital One Shopping Research (source-1). The new scoring models aim to give lenders a more comprehensive view of consumers' repayment behaviors and credit readiness, particularly benefiting those who may not have traditional credit histories (source-3).
The incorporation of BNPL data is significant because it allows for a more complete assessment of a consumer's financial behavior. Previously, these loans were not reflected in credit reports, leaving a gap in lenders' understanding of borrowers' debt levels and repayment capabilities (source-5). FICO's new model is expected to help improve credit scores for responsible users of BNPL loans, while also posing risks for those who may misuse them (source-3).
Analysis
The claim that FICO's new model will impact credit scores for millions of Americans is supported by credible sources, including FICO's official announcements and reports from major news outlets. The introduction of BNPL data into credit scores is a significant shift in how creditworthiness is assessed, particularly for younger consumers and those with limited credit histories. This change is expected to provide a more accurate picture of a consumer's financial behavior, which could lead to increased access to credit for some individuals (source-1, source-5).
However, there are caveats. Not all BNPL companies report to credit bureaus, and not all lenders will adopt the new FICO models immediately. This means that while millions may be affected, the extent of the impact will vary based on individual circumstances and lender practices (source-3). Additionally, there are concerns about potential risks associated with BNPL loans, such as "loan stacking," where consumers take on multiple loans across different providers, which could lead to financial strain (source-3).
Conclusion
Verdict: Partially True
The claim that "FICO's new model will impact credit scores for millions of Americans" is partially true. While it is accurate that FICO will begin incorporating BNPL loan histories into credit scores, the actual impact will depend on various factors, including the willingness of BNPL companies to report data and the adoption of the new scoring models by lenders. Therefore, while millions may be affected, the degree of impact will not be uniform across all consumers.
