Credit Bureaus To Add Buy Now, Pay Later to Reports

Moves by Experian, Equifax aim to remedy gap in reporting BNPL transactions

Shop owner returning credit card to customer at counter

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Buy now, pay later has become so popular that major credit bureaus are finding ways to incorporate the new payment method into credit reports for the benefit of consumers as well as lenders.

Key Takeaways

  • While more consumers are using buy now, pay later as a payment method, their transactions haven’t been reported regularly to the major credit bureaus.
  • The credit bureaus have begun trying to fill the gap by collecting data so lenders can better assess their loan risks and consumers can benefit from their on-time payment histories.
  • The credit bureau moves might help alleviate some concerns expressed in a probe of BNPL by the Consumer Financial Protection Bureau.

Experian said Thursday that it plans to launch a dedicated buy now, pay later bureau this spring to allow BNPL providers to report data on all types of point-of-sale products and consumer payments. Equifax said it will start including consumers’ BNPL activity as an entry in traditional credit reports this quarter, allowing consumers who make on-time payments to potentially build or improve their FICO score (used by lenders to determine the risks of loaning you money). Transunion also has reportedly been working on its own BNPL credit reporting service, but the company didn’t return calls for comment.

Even though 45 million Americans used BNPL products last year, up 300% from 2018 by one estimate, most BNPL accounts haven’t been reported to credit bureaus because current scoring models are based on mainstream credit products like credit cards. In addition, BNPL providers aren’t required to consider the consumer’s ability to make payments, so they usually only run a “soft” credit check or no check at all. That meant consumers who were paying on time weren’t getting credit for making their payments, and lenders weren’t getting the visibility that would help them determine how much to lend and to whom. The Equifax and Experian programs aim to solve these problems.

The new Experian “specialty bureau,” for example, will let providers furnish data about consumer payments including the number of outstanding BNPL loans, total BNPL loan amounts, and BNPL payment status. Lenders will be able to tap this information to help better assess the risks associated with loaning money. Eventually, the credit bureau plans to incorporate some of its BNPL data into consumers’ traditional credit reports to help them build credit, said Greg Wright, executive vice president and chief product officer for Experian Consumer Information Services, in an email.

BNPL services offer customers what is often an interest-free way to spread payments for retail purchases over time. The services are similar to old-fashioned layaway programs, though the customer can take their items home right away. 

The payment method’s increasing popularity hasn’t come without controversy. In December, the Consumer Financial Protection Bureau began a probe into BNPL companies to determine whether customers using BNPL are building up excessive debt, whether the companies are skirting consumer protection laws, and what companies are doing with the financial information they collect from customers.

Affirm, a BNPL company that’s been working with Experian and credit reporting agencies, said reporting to credit bureaus should alleviate some of those concerns and provide protections for consumers.

“Reporting to credit bureaus helps protect consumers and build their credit histories,” a spokesperson for Affirm said in an email. “It also enables all responsible underwriters to more accurately assess risk and help prevent consumers from being overextended. We believe credit bureau data serves a vital role in ensuring positive credit outcomes. ”

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