Your Credit Score: What Buy Now, Pay Later Really Means

Credit scores are getting an update. FICO, a major credit scoring company, is now including "buy now, pay later" (BNPL) data in some of their scores. This change could impact how lenders view your financial health. BNPL services are everywhere. They allow you to break down purchases into smaller payments. It's like a modern layaway plan. In 2024, 15% of American adults used this payment method. It's especially popular among younger people, women, and those with lower incomes. But who's using BNPL? A lot of people! It's convenient and helps spread out costs. However, the average loan is only about $142. That's not a huge amount, but it's still debt. Lenders want a full picture of your finances. Without BNPL data, they might offer more credit than you can handle. That's not good for anyone. Some companies, like Affirm, are already sharing this data with credit bureaus. How will this affect your credit score? It depends. Paying on time can help your score. Missing payments? That's a problem. FICO says most people saw only a small change in their scores. But almost a quarter of BNPL users made late payments last year. There's a catch: BNPL doesn't have the same protections as credit cards. If you have a dispute, it's not always easy to get help. The Consumer Financial Protection Bureau tried to change that, but the rule might be rescinded. So, what's the bottom line? If you use BNPL responsibly, this change might help your credit score. But if you're not careful, it could hurt you. Always remember: managing debt wisely is key to a good credit score.