Fact Check: "New BNPL loans could increase credit scores for timely payers."
What We Know
The claim that "New BNPL loans could increase credit scores for timely payers" is based on recent announcements regarding the integration of Buy Now, Pay Later (BNPL) loans into credit scoring models. FICO, a leading credit scoring company, has announced that it will begin factoring BNPL loans into its credit scoring system starting in the fall of 2025. This change is significant because previously, BNPL loans were excluded from credit scores, which meant that timely payments on these loans did not contribute positively to a consumer's credit profile (AP News, USA Today).
FICO's new model aims to provide lenders with more insight into consumers' repayment behaviors, especially for those who may not have extensive credit histories. According to FICO, consumers who consistently repay their BNPL loans on time could see improvements in their credit scores (AP News). This is particularly relevant for younger consumers and those with limited credit experience, as BNPL loans are often marketed as alternatives to traditional credit cards (AP News).
However, it is important to note that not all BNPL companies report their data to credit bureaus, and lenders may choose whether or not to adopt the new scoring model (AP News). Therefore, while the potential for score improvement exists, its realization will depend on broader adoption and reporting practices across the industry.
Analysis
The evidence supporting the claim is strong, as it is backed by statements from FICO and reports from reputable news sources. The announcement from FICO indicates a clear intention to incorporate BNPL loans into credit scoring, which could benefit timely payers by allowing them to build their credit scores through responsible use of these loans (AP News, CNBC).
However, there are critical considerations regarding the implementation of this model. Experts have raised concerns about the potential negative impacts on consumers who are already credit-restrained. For instance, integrating BNPL loans into credit scores could lead to unexpected consequences for individuals who may not have previously had these loans affect their credit profiles (AP News). Furthermore, the average BNPL loan amount is relatively small (around $135), which may not significantly impact a credit score unless the consumer has a broader credit profile (AP News).
Additionally, the reliability of this claim hinges on the widespread adoption of the new scoring model by lenders and the willingness of BNPL companies to report their data. As noted by experts, it may take time for these changes to be fully realized in the credit scoring landscape (AP News, USA Today).
Conclusion
The claim that "New BNPL loans could increase credit scores for timely payers" is Partially True. While there is a clear pathway for timely payers to improve their credit scores through the new FICO model, several factors—such as the adoption of the model by lenders and the reporting practices of BNPL companies—will determine the extent of this impact. Thus, while the potential exists, it is not guaranteed that all consumers will see significant improvements in their credit scores.
