People using Buy Now Pay Later (BNPL) methods for their retail purchases could have these small-time, mostly interest-free loans appear on their credit reports. Lender Affirm began reporting such loans to credit bureau Experian this week.
Previously, only long-term, interest-bearing Affirm lending, like mortgages or car loans, were reported. But now, all new BNPL loans will appear on credit reports, whether paid on time or not.
For consumers, this means on-time payments could help build credit, but missed payments might be a red flag for lenders. While BNPL debt hasn’t impacted credit scores yet, it could change as scoring models evolve.
Consumer credit agency TransUnion recently began collecting BNPL data and may add it to its credit reports soon.
BNPL loans exploded during the pandemic, with 277 million loans worth $34 billion issued in 2022, up from 180 million loans worth $24 billion in 2021, according to the Consumer Financial Protection Bureau (CFPB).
Meanwhile, lenders have limited visibility into this debt.
CFPB has warned that “loan stacking” is very prevalent and noted that in 2022, over 60% of users had more than one loan at a time, and 33% had loans across multiple providers.
Adobe Analytics estimates that $19.2 billion was spent using BNPL payments in the first quarter of 2024. Forecasts indicate the BNPL market could reach nearly $700 billion globally by 2028.