Fact Check: "Missed BNPL payments can still hurt your credit score."
What We Know
Buy Now, Pay Later (BNPL) services allow consumers to make purchases and pay for them in installments, often without interest. Currently, most BNPL lenders do not report payment histories to major credit reporting agencies, meaning that timely payments typically do not influence credit scores. However, if a consumer fails to repay their BNPL loan and the account is sent to collections, this delinquency can be reported to credit bureaus and negatively affect credit scores (Consumer Financial Protection Bureau).
As of now, the integration of BNPL loans into credit scoring models is evolving. FICO has announced that it will begin incorporating BNPL loans into its credit scoring system starting in the fall of 2025. This change aims to provide lenders with a more comprehensive view of a consumer's creditworthiness, particularly for those who primarily use BNPL services (AP News, USA Today).
Analysis
The claim that missed BNPL payments can hurt your credit score is partially true. While it is accurate that most BNPL providers do not report payment histories to credit bureaus, missed payments can lead to accounts being sent to collections, which can then be reported and negatively impact credit scores (TransUnion). This means that while a missed payment on its own may not immediately affect a credit score, the subsequent actions taken by lenders (like sending the debt to collections) can lead to a negative impact.
The reliability of the sources is generally high. The Consumer Financial Protection Bureau is a government agency that provides accurate and unbiased information regarding financial products. The AP News and USA Today are reputable news organizations that report on financial matters with a degree of authority. However, it is important to note that the landscape of BNPL and credit scoring is changing, and the future integration of BNPL loans into credit scores could alter the current understanding of how these loans affect creditworthiness.
Conclusion
The verdict is Partially True. While missed BNPL payments do not directly impact credit scores under current practices, they can lead to negative consequences if the debt is sent to collections. Furthermore, the upcoming changes in credit scoring models may soon include BNPL loans, which could further complicate the relationship between these loans and credit scores.
Sources
- Will a Buy Now, Pay Later (BNPL) loan impact my credit scores?
- Buy Now, Pay Later loans will soon affect some credit scores
- How Do BNPL Missed Payments Impact Your Credit Score?
- Buy now, pay later plans will soon impact your credit score
- Buy now, Pay Later loans will soon affect FICO scores - USA TODAY
- BNPL loans will affect credit scores - morningbrew.com
