Summary
Buy now, pay later loans allow people to split purchases into installments. Starting in the fall, FICO will include data from these loans in two of its credit scoring models. This change could impact individuals' credit scores based on their payment behavior.
Key Facts
- FICO is a company that creates credit scores, which show how reliable someone is at paying back money.
- FICO announced it will add buy now, pay later loan data to two of its credit scoring models.
- Buy now, pay later allows shoppers to pay for purchases in smaller installments.
- This payment option has become common online, with services like Affirm and Klarna.
- In 2024, about 15% of American adults used buy now, pay later in the past year.
- This payment method is mostly used by lower-income groups, young people, and minorities.
- Paying on time can improve a credit score, while missed payments can lower it.
- FICO’s yearlong study showed that most people's credit scores changed by only about 10 points in either direction after including these loans.
