FICO, a leading credit scoring provider, announced the integration of buy now, pay later (BNPL) data into its credit scores, marking a significant development in how consumer creditworthiness is assessed.
FICO announced on Monday its plan to integrate buy now , pay later ( BNPL ) data into credit scores , reflecting the surging popularity of this payment method. The FICO Score 10 BNPL and FICO Score 10 T BNPL will be the first credit scores from a leading credit scoring provider to incorporate this data, marking a significant advancement in credit scoring by acknowledging the growing importance of BNPL loans within the U.S. credit ecosystem.
Julie May, vice president of B2B Scores at FICO, stated, 'Buy Now, Pay Later loans are playing an increasingly important role in consumers’ financial lives.' Expanding the FICO Score 10 Suite with these new models, May emphasized, 'enables lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products.'FICO, building upon input from the largest U.S. lenders, found a widespread consensus that integrating BNPL data into credit scoring is a critical advancement. This integration allows lenders to make more informed and accurate decisions while responsibly expanding credit access. FICO asserts that these scores will provide lenders with greater visibility into consumers’ repayment behaviors, enabling a more comprehensive view of their credit readiness. The company's move comes as buy now, pay later services such as Afterpay, Klarna, Affirm, and PayPal have gained significant traction. With consumers grappling with persistent inflation, high interest rates, and the resumption of student loan payments after a pandemic-related pause, these services have become a popular choice to alleviate financial strain. The services allow consumers to make purchases and pay for them in installments, often with no interest or fees. However, interest can accrue on certain plans, and late fees may apply if consumers lack sufficient funds to cover payments. While traditionally utilized for larger purchases, the prevalence of BNPL financing in the current economic climate has led to a growing number of consumers using these options to pay for essentials, including food. Data from an April LendingTree report reveals that 25% of BNPL users have used the service to purchase groceries, a significant increase from 14% a year ago. This change underscores the increasing reliance on BNPL services for everyday expenses as consumers navigate financial challenges
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