Brace yourself: a major shift in credit scoring is coming this fall that could dent your financial standing.
According to The Sun US, FICO, the dominant force in U.S. credit scoring, is rolling out a new policy to factor in buy now, pay later (BNPL) loan data, a change that could impact millions of Americans’ credit scores and reshape how lenders view borrowers.
On Monday, FICO, a division of Fair Isaac Corp., unveiled this update, calling it a “significant advancement” in assessing creditworthiness.
Starting this fall, FICO’s updated scoring model will include BNPL loan activity, targeting the hundreds of millions of these loans tied to the “pay later” checkout option.
This tweak aims to mirror the rising role of BNPL loans in the U.S. credit landscape. Lenders, mortgage brokers, and loan officers will gain visibility into what’s often called “phantom debt”—installment loans that previously flew under the radar on credit reports.
Here’s the rub: while this update offers transparency, it raises serious concerns for consumers who lean on short-term financing.
The Federal Reserve’s latest report shows nearly 25% of BNPL users paid late in 2024, up from 18% the prior year. Missing payments could now directly harm your credit score under the new system.
Compounding the risk is “loan stacking,” a term from the Consumer Financial Protection Bureau (CFPB), where shoppers juggle multiple BNPL agreements at once, especially during holiday spending spikes.
BNPL loans aren’t just for luxuries anymore—economic pressure is pushing Americans to use them for basics.
A quarter of Americans now rely on these loans for groceries, a 14% jump from last year, according to data released on June 4. As Matt Schulz of Lending Tree told CBS News, this “clearly shows” many are struggling with high costs and seeking any relief.
Since 2019, BNPL options—often zero-interest and split into four or fewer payments—have exploded in popularity, with merchants partnering with providers like Affirm, Klarna, PayPal, and Apple to offer them at checkout.
Here’s where you can take control: Financial experts warn against overextending yourself with multiple BNPL loans at once to dodge credit score pitfalls.
Consider setting up autopay to sidestep late fees, and whenever possible, pay for larger purchases outright without leaning on BNPL. If you qualify, using a credit card instead offers stronger protections under the Fair Credit Billing Act, like safeguards for damaged or undelivered goods.
FICO’s new model will run alongside the current one, and banks or credit card firms aren’t forced to use the BNPL data—yet. But as Julie May, VP at FICO, noted, these loans play an “increasingly important role” in consumers’ lives. Stay vigilant, because this fall could mark the start of a tighter credit landscape where every payment counts.