Fact Check: "Hundreds of millions of BNPL loans will soon impact credit scores for Americans."
What We Know
The claim that "hundreds of millions of BNPL loans will soon impact credit scores for Americans" is based on recent announcements from FICO, the credit scoring company. FICO has stated that it will begin incorporating Buy Now, Pay Later (BNPL) loan histories into its credit scoring models starting in the fall of 2025. This change is significant because FICO scores are used by approximately 90% of U.S. lenders to assess a borrower's creditworthiness (AP News, New York Times).
Previously, BNPL loans did not affect credit scores, as they were not reported to credit bureaus in a standardized manner. However, FICO's new model aims to provide lenders with a more comprehensive view of consumers' repayment behaviors, particularly as the popularity of BNPL loans has surged, with Americans spending over $116 billion using these loans in 2023 (Washington Post, CNBC).
While FICO's decision to include BNPL loans in credit scores is a major development, it is important to note that not all BNPL companies report to credit bureaus, and not all lenders will adopt the new scoring model immediately (CNN, Axios).
Analysis
The evidence supporting the claim is robust, as it is grounded in official statements from FICO and corroborated by multiple reputable news sources. The announcement from FICO indicates a clear intention to integrate BNPL loan data into credit scores, which will indeed impact millions of Americans who utilize these loans (AP News, New York Times).
However, the analysis also reveals limitations. While the integration of BNPL loans into credit scores is a significant step, the actual impact on consumers' credit scores may vary. Experts have noted that the average BNPL loan is relatively small (around $135), and consistent repayment of such loans may not lead to substantial changes in credit scores (Consumer Federation of America). Additionally, there are concerns regarding the potential negative effects on credit-restrained individuals, as the sudden inclusion of BNPL loans could complicate their credit profiles (Center for Responsible Lending).
Moreover, the rollout of this new scoring model may take time, as not all BNPL companies will report data to credit bureaus, and lenders may be slow to adopt the new models (Bankrate). This gradual implementation suggests that while the claim is true in principle, the immediate effects on credit scores may not be as widespread or impactful as suggested.
Conclusion
The claim that "hundreds of millions of BNPL loans will soon impact credit scores for Americans" is Partially True. While FICO's decision to include BNPL loans in credit scoring models is set to affect many consumers, 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. Thus, while the foundation of the claim is accurate, the nuances surrounding its implementation and effects warrant a more cautious interpretation.
Sources
- Buy Now, Pay Later loans will soon affect some credit scores
- FICO to Include 'Buy Now, Pay Later' Loan History in Credit Scores
- Buy Now, Pay Later loans will soon affect some credit scores
- Buy now, pay later plans will soon impact your credit score - CNBC
- Buy Now, Pay Later loans will factor in to Americans' credit scores
- FICO credit scores to include buy-now-pay-later loans - Axios
