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FICO to incorporate buy-now-pay-later loans into credit scores

282 points by cebert 1y ago

OptionOfT 1y ago
What's interesting here is that normally BNPL only does a soft check. I wonder if this is going to change. Equally, I find it weird that companies can ding your credit for not paying but have no obligation to report on-time payments. It should be both or none.
- hopelite 1y ago
  Technically it is largely already built in as an assumption that payments are made on time. You also don’t lend to a friend you will not be paid back by, will you? The credit score reduction is merely a diversion from norm, i.e., the expectation that you pay what you agree you owe. Ironically, there is actually zero reward for being a reliable person, there is only a punishment for being an unreliable person; and with all the money printing, even the punishment for being an unreliable person has been almost totally removed and being reliable and upstanding is effectively a punishment since you don’t get to live like a king on a shoe string and then declare bankruptcy and have credit extended to you immediately afterwards because money is cheapened and consequences are void.
  - DrillShopper 1y ago
    > You also don’t lend to a friend you will not be paid back by, will you? I don't lend to friends and family. It's not worth losing those bonds over. I'll help financially where I can, and I'm not going to stop anyone paying me back, but I'm assuming that money is just gone. Completely different calculus compared to credit.
firesteelrain 1y ago
Credit scores will tank further
- milesrout 1y ago
  [dead]
- ZYbCRq22HbJ2y7 1y ago
  Why? "The industry has long believed that consumers using BNPL responsibly should result in positive credit scores, as the majority of users are paying back in full and on time."
  - steveBK123 1y ago
    Because "most people pay back fully on time" is not the metric. The real question is what are the delinquency and default rates for BNPL as compared to other forms of consumer credit. Given the previous understanding that it didn't hit your FICO, the retailer subsidy as a sales lead, and the types of products people were financing.. one might assume worse..
  - firesteelrain 1y ago
    Because it’s shadow debt and it will show the person as overleveraged with a bunch of Affirm loans
- UltraSane 1y ago
  If customers make every payment their score should improve.
  - dh2022 1y ago
    What is the benefit for a consumer to use this type of loan and then pay it back on time versus using a credit card and then paying the card back on time? To me this seems like a new product that would target a different consumer than the one that makes payments on time. But I would like if someone challenges this view. Thanks!
    - loeg 1y ago
      > What is the benefit for a consumer to use this type of loan and then pay it back on time versus using a credit card and then paying the card back on time? Slightly longer repayment time frames. (Multiple months instead of just one.)
jppope 1y ago
thats interesting. I was always wondering what the hustle was, guess that was it- it was outside of the credit system
- NewJazz 1y ago
  It already shows up when mortgage lenders do their checks, AIUI.
  - hopelite 1y ago
    The irony is that it does not even really matter anymore at this stage, especially with mortgages. So you get a few points taken off because you have 800 vs 600 score, but it won’t really make a difference when both are on the same out of control roller coasters where house prices have increased by 100% in 7 years.
    - nradov 1y ago
      US home prices haven't increased by 100% in 7 years. On a national basis, the Case-Shiller index has only increased by 65% (nominal dollars, not inflation adjusted). https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA In the short term, the difference in mortgage interest rates between prime versus subprime loans can have a major impact on borrower cashflow and the type of property they can afford.
      - hopelite 1y ago
        I’m not sure why you would rationalize things so much. Yes, the biased Case-Shiller shows that the avg is only up 65% (think about that!!! 65%!!!) which is kept suppressed by the prices only increasing far slower in places where no one wants to live because there are no opportunities. I know first hand that prices have doubled in the places people want to live because all the money has pooled there through all the money printing fraud. It’s not even hard to see if you simply look yourself, not rely on some intentionally moderating Case-Shiller index. So again, why do you make excuses for 65% increases because it’s not 100%?????? 65%, my man!
ecshafer 1y ago
This would probably only affect the people with the worst credit scores I imagine. I just don't see a ton of 800+ credit score people deciding to spend 5 payments of $20 for a pair of $80 shoes.
- loeg 1y ago
  Plenty of people with good credit use BNPL loans; they are offered on much higher cost items than $80.
  - quickthrowman 1y ago
    1.5% back on the purchase via CC rewards beats earning 1% over 3 months (4% yield) in a HYSA every time, anyone using BNPL is using them suboptimally. For a 3 month BNPL loan to be worth it, HYSA rates must be over 6%, and actually a bit more due to the time value of money; you get CC reward cash after the statement period but it takes 90 days (and up to ~120 days) to get three monthly interest payments.
    - loeg 1y ago
      Maybe you replied in the wrong place? This isn't responsive to my comment.
      - quickthrowman 1y ago
        No, I was replying to your comment. Using a BNPL loan is less optimal than paying with a credit card due to the cash back rewards. People with good credit may use them, but it makes zero sense to do so. You always come out ahead by using a credit card and paying it off immediately unless the high yield savings rate is 6% or higher assuming a BNPL loan term of 3 months. Beyond that, it does make sense to use them, like Apple’s 12 month no interest on Apple products with the Apple Card.
        loeg 1y ago
        I don't think a discussion of optimality is relevant to what I wrote. Lots of people with good credit are not maximizing credit card rewards and sign-up bonuses, either. Humans are not homo economicus. (And just as a factual matter, there are sometimes longer BNPL terms than 3 months, which changes the math on what is "optimal.")
seatac76 1y ago
It probably makes sense to do so. Not that I condone the FICO hustle. But small loans can add up quickly and delinquencies need to be measured for financial market stability.
- kurthr 1y ago
  If you're paying for your food delivery on an installment plan, you're probably going to have a blow up. https://www.nytimes.com/2025/03/23/business/doordash-klarna-payments.html https://www.nytimes.com/2025/03/23/business/doordash-klarna-...
  - hopelite 1y ago
    The worst part is that it will equally affect all the responsible people when it blows up just like it is affecting them now when BNPL is just one more way in which demand is artificially created that drives up prices.
  - 2OEH8eoCRo0 1y ago
    I don't understand people. If you need to use an installment plan why the hell are you using DoorDash which is a luxury ripoff? I can afford it but I don't use it because it's obscene. I'm tempted to say that some people are poor because they're imbeciles with poor financial sense.
    - ProllyInfamous 1y ago
      >using DoorDash ... is a luxury ripoff I live in a working-class neighborhood and it blows my mind how often DoorDash visits my neighbors (particularly considering there are dozens of restaurants within one mile). The only time I encourage delivery service is when we're too intoxicated to drive.
      - pests 1y ago
        I stayed with distant family for a bit around COVID when everyone was WFH. Him and his wife must have gotten 3-5 DoorDash deliveries a day pretty reliably, I was blown away. Each ordering their own thing from different restaurants. Random “I want a donut from 711 at 1am” where I’m sure fees/tip were multiples of the actual food cost. Sometimes the different drivers would arrive at the same time and we’d have a little jam up on the porch.
PostOnce 1y ago
Theoretically, credit should be used for one thing: to make more money. (not less) However, instead of using it to buy or construct a machine to triple what you can produce in an hour, the average person is using it to delay having to work that hour at all, in exchange for having to work an hour and six minutes sometime later. At some point, you run out of hours available and the house of cards collapses. i.e., credit can buy time in the nearly literal sense, you can do an hour's work in half an hour because the money facilitates it, meaning you can now make more money. If instead of investing in work you're spending on play, then you end up with a time deficit. or, e.g. you can buy 3 franchises in 3 months instead of 3 years (i.e. income from the 1 franchise), trading credit for time to make more money, instead of burning it. It'd have been nice had they taught me this in school.
- Neywiny 1y ago
  I think that's a bit disingenuous. It's not always delaying work. There's only so much time and there are some people who cannot afford to live with the time in the day, the skillset they have, and the market conditions (both income and expenses). Your tone and word choice shows you don't understand the problem at all. If somebody can BNPL or otherwise credit lifesaving medicine (such as the many people in the USA who die from inability to afford healthcare), that's not play money because they don't want to work.
  - PostOnce 1y ago
    Obviously there are edge cases. Debt can be a form of insurance for the individual. However, I stood in line behind someone who financed a bowl of noodles with afterpay, and it got me thinking. Those are the folks I'm talking about.
    - Neywiny 1y ago
      Sure, but could that not be an edge case? I'd imagine most people aren't sharing the sadder parts of their life. Or, is it possible they spent the rest of their money on everything more important? Could be argued they should cook at home but still.
deleted 1y ago
[deleted]
janalsncm 1y ago
What is the functional difference between BNPL and credit cards that can explain why it’s become popular? A credit card is literally “buy now pay later” so is it just the ease of onboarding?
- scarface_74 1y ago
  Fixed payment schedule and no interest being charged.
  - SoftTalker 1y ago
    For most of them, interest accrues from the date of purchased but is not charged if you pay on time. If you don’t, you owe all the back interest from day one.
    - Tadpole9181 1y ago
      Ah, that's the scam. Yet another poor tax, then? The rich get interest on money they already spent, the poor get an illusion of safety followed by even more destitution?
      - scarface_74 1y ago
        That’s not how BNPL works in its modern form with the third party companies. You pay late fees if you pay late. If you have a 3 month plan, they divide the payment into three equal installments and you pay it off. The parent poster is confusing BNPL with cobranded cards like Room 2 Go credit cards that have special promotions with “0% for x months”. It’s a regular credit card where the minimum payment won’t guarantee that you pay the original amount off in “x” months, but you only have to pay 2% of the balance. These have always shown up on your credit report. They are “deferred interest” plans where if you don’t pay the balance off in $x months it will charge you back interest.
      - drexlspivey 1y ago
        Ah yes, the big scam of offering zero interest unsecured loans to anyone without even running a credit check. These companies are bound to have big losses when things go south because they literally offer you free money.
bediger4000 1y ago
FICO scores are a joke. They hint at what they use to calculate them, but the algorithms are kept secret. Fair Isaac can't reveal the algorithms, otherwise they'd get gamed. Incentives to keep bad info and wrong info in dossiers are strong, too. If allowed, Fair Isaac would put rumors and other bullshit on n your file, and never take it out.
- mritchie712 1y ago
  the score is easy to reverse engineer if you have the data and pretty much every big bank has the data. source: I worked at a big bank and did this, it was easy. Most of the stuff is obvious and intuitive (don't make late payments). One that's not terribly intuitive is credit line utilization. It has a big impact and most people don't think about it. For example, it's better to have 2k in credit card debt if you have 20k in credit lines vs. 1k in debt on 2k in credit lines.
  - astura 1y ago
    >the score is easy to reverse engineer if you have the data In fact, FICO even provides you with a tool to "reverse engineer" a credit score given the data. https://www.myfico.com/fico-credit-score-estimator/estimator https://www.myfico.com/fico-credit-score-estimator/estimator
  - xyst 1y ago
    You forget the scoring is not based on individual performance only. It also includes your performance compared to those in similar groups or buckets. Ever wonder why your credit score goes down randomly in one month despite nothing changing? FICO’s black box algorithm put you in a newer credit group of higher credit scores. In that group, your profile scored much lower compared to others. Thus you get a 10-20 point deduction. If you have a long history of good credit it probably doesn’t matter. But if you are a young person looking for auto/home mortgages, that 10-20 pt dedication _could_ lead to slightly higher APRs depending on the underwriters own scoring algorithm.
- astura 1y ago
  They don't really "hint at what they use to calculate them" so much as "tell you exactly what is used to calculate them, how it's calculated, and even include an estimation tool so you can calculate your score yourself" https://www.myfico.com/credit-education/whats-in-your-credit-score https://www.myfico.com/credit-education/whats-in-your-credit... >payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). https://www.myfico.com/fico-credit-score-estimator/estimator https://www.myfico.com/fico-credit-score-estimator/estimator For fucks sake, at least keep your conspiracy theories somewhat believable. Absolutely nobody is worried about "gaming" credit scores because the activities to "game" credit scores are identical to the activities that make you likely to pay off debt in the future and that's what a credit score measures. So it doesn't matter if you pay off your bills to "game" or to be responsible, you're still paying off your bills.
mihaaly 1y ago
The security and privacy nighmare that the various credit score systems bring on by collecting and storing sensitive data on individuals some way somewhere with some sort of access for someones for something (a very real big brother in esence on essentials matters), is a good incentive keeping people away from loans. The less is more in this case. Avoiding avoidables. The crime is that in the very essential case of abode it is impossible to avoid for the generic population. Both renting and mortgages require you do disclose your life for organizations and sometimes individuals having financial incentives with you. Making you exposed and voulnarable, no choice is given. It is a must (you and your dependants cannot choose not to live somewhere). So they do not have to risk their capital gain, allowed to risk your most sensitive personal data.
focusgroup0 1y ago
Why do some ancient traditions ban usury?
- mcherm 1y ago
  I suspect actually MOST ancient traditions ban usury (or ban lending altogether). Christianity banned usury, Islam banned essentially all lending, Hinduism banned some casts from lending and regulated the lending of others[1]. I think the practice was found to be corrosive to societies and thus at one point or another many of them tried to ban it. (Lending is also very helpful for commerce, so most societies also reintroduced it. Actual practice varied at different points in history.) 1. https://www.sacred-texts.com/hin/sbe14/sbe1405.htm https://www.sacred-texts.com/hin/sbe14/sbe1405.htm
  - scarface_74 1y ago
    If you look up the various means of buying home without having all of the money up front that are compliant, it’s just a mortgage by different name. https://www.guidanceresidential.com/resources/faith-based-financing/what-is-an-islamic-mortgage-and-how-does-it-work/ https://www.guidanceresidential.com/resources/faith-based-fi...
  - groos 1y ago
    All Abrahamic faiths ban lending where the returned amount is greater than that borrowed, i.e. charging interest. Judaism "worked around" it by banning it amongs Jews but allowed lending on interest to non-Jews. Christianity originally followed Jewish law in this regard but abandoned it later on. Islam, adheres to banning interest strictly, but this is subject to different interpretations. E.g., buying an item at a higher price but paying in installments is allowed by some schools of jurisprudence, while others disallow it, while there is unanimous condemnation of a loan whose interest "doubles and redoubles" [explicit in the Quran], which is the typical credit card or mortgage. The main difference in buying at a higher price + installments from a conventional interest based lone is that the profit gets agreed to at sale, and it holds regardless of whether the full payment is made early or not. Muslims have got around the problem of not being able to pay for houses in cash by constructing a joint ownership scheme, where the lender and buyer enter into a joint ownership of the house; the buyer pays rent and adds extra to buy more equity, and the rent goes to both the buyer and lender in proportion to their equity as a business partnership. Over time, the rent part decreases and the equity buying accelerates. There are other models, but this is the most popular one. Due to Federal and state laws, such mortgages are often reported with interest rates even though, technically, interest is not being charged.
Yizahi 1y ago
They didn't before? It's a credit like any other type, increasing debt burden like any credit. Seems like corru... ahem, lobbying of course. :)
- Hamuko 1y ago
  They can't keep up with techbros coming up with new names for debt.
- hobs 1y ago
  Read the article and approach, the BNPL is going to be in effect like one credit card opened per transaction.
- fHr 1y ago
  Yep you're onto something here but surely they operate within legal reasonable frameworks of the government surely.
  - byteknight 1y ago
    Regardless no one can make you buy anything
- therealpygon 1y ago
  They also didn’t destroy people’s credit when they got upside down and had to return the $5k couch or $15k car they were talked into buying on their fixed income, but that’s usually “other people” problems.
  - ricardbejarano 1y ago
    Being "talked into" is one hell of an excuse not to take accountability for your own purchases.
    - cyanydeez 1y ago
      If the DOD can't do it, why should poor people? https://americanmilitarynews.com/2024/11/pentagon-fails-7th-audit-cant-fully-account-for-824-billion/ https://americanmilitarynews.com/2024/11/pentagon-fails-7th-...
eagerpace 1y ago
How long until my score goes down because I don’t use these?!??
- ProllyInfamous 1y ago
  Background: During the riskiest span of my life, financially, I used to have a 780+ score and an AMEX Gold (for about a decade, early 2000s); now I don't have any credit cards, my vehicles are entirely paid. My Conclusion: Credit scores demonstrate ability to re-pay interest (i.e. lender profits); it is a score that demonstrates how profitable you might-could-be, not necessarily representative of fiscal wisdom. Meditation: not caring about your credit worthiness is a fantastic approach to life, as long as you've already bought your house (or have alternate plans, not involving a mortgage).
hk1337 1y ago
This seems like it’s going to harm more people than help. Encouraging fiscal irresponsibility under the guise of improving your credit score. All it’s really going to do is give lenders another metric to deny you a loan, either because of delinquent accounts or too many accounts opened and closed.
- xyst 1y ago
  Maybe not deny in case of too many accounts opened or closed but risk profile can change. So think higher APRs compared to people without bnpl.
__mharrison__ 1y ago
Circular much?
- __mharrison__ 1y ago
  For the downvoters... having worked in this industry, these loans are already heavily modeled with FICO scores. Who is wagging which tail?
9cb14c1ec0 1y ago
Good, it will bring the stupid BNPL ecosystem back to earth, when people stop using it as free money.
xyst 1y ago
yet another vague data point mortgage underwriters can use to deny your loan In corporate back room, "persons score is high enough to qualify and income is good enough but there’s a strong history of bnpl usage. Over 200 accounts ranging from food to groceries and luxury items. Risk to default has increased, thus approval for slightly higher APR compared to peers with none to lower BNPL usage.” Rinse and repeat this for hundreds of thousands of loans and now bank is raking in (more) profits
- wat10000 1y ago
  How do banks make more profit by issuing fewer mortgages?
segmondy 1y ago
So are some of us going to get penalized for not having a buy-now-pay-later history?
- asdfasvea 1y ago
  Depends on your definition of 'penalized'. FICO is all about identifying good ROI candidates. Say you are a lender, you want someone who constantly uses credit, always pays their bills and has the capacity take on new debt. That's what FICO is for. It's not some consumer reward system. It's not your score to game, it's a score on you for companies to game. Quit playing the game. Credit score NULL.
  - benmanns 1y ago
    IMO the game is to get the highest credit score while spending the least on credit. That way if you e.g. need to acquire housing, a reliable vehicle, business loans, even employment or insurance, you will be able to and can get a good deal. Sure, paying nothing saves you money, but it also costs you the opportunity cost between what you could earn/save by utilizing credit vs waiting months to years to save up and pay cash.
    - hedora 1y ago
      The easiest approach is to get high point credit cards and pay them off each month. That way, you don’t pay anything (and are subsidized). Of course the money comes from people that don’t do this, and vendors’ margins. So, it’s “Participate in the credit card racket or no house for you” on one side and “That’s a nice shop you have there. It’d be a shame if something happened to it.” on the other. The US really should abolish the credit rating industry.
alkonaut 1y ago
Does anyone else live in a place where there isn't a visible "score" for how valuable you are, but rather only a "credit check" for how risky you are, which is performed if you apply for new credit (buying anything with an invoice, getting a credit card, or taking any other kind of loan)? Meaning that if you have a good income and no history of failing payments, you are basically passing the check with flying colors, and will have the same "score" as someone who has had tons of well-served credit before? This thing where the score as in "risk" and score as in "business opportunity for lenders" is intertwined, and creates weird incentives for consumers, is that only a US thing or do any other countries have something similar?
- ch4s3 1y ago
  Credit scores aren't a score of how valuable you are, they're a score of creditworthiness or how unlikely you are to default on a loan. The largest factors are age of credit and payment history. Utilization is also a factor. Someone who occasionally misses payments and has high utilization is going to be more profitable but higher risk to lend to.
  - parpfish 1y ago
    Just because that’s what a scores is designed to do it doesn’t mean that’s what businesses use it for downstream. The fact people always debate what a credit score really means suggests that there are too many factors rolled up into a single number when we should really have a few distinct sub-scales. Anybody that has made a dashboard for a ceo with a short attention span that refuses to deal with nuance and just wants to see “a number” knows this problem all too well
    - ch4s3 1y ago
      I agree in general, but a credit score absolutely DOES NOT tell you how profitable someone is to lend to, and in general someone with a very high credit score is a very low margin customer.
      - 1y ago
charles_f 1y ago
For the line to go up you need people to keep buying more, and reducing costs. But when these costs are people's salary, you end up paying them less, so they can't buy more, thus credit. The overreliance on credit as a new step in the consumption cycle is an indicator that the whole system is collapsing, but somehow it's supposed to be good news that buying a burrito might be used against you to further drawn you down. The town is on fire but good news, your house being burned down will get you air-miles.
thomascountz 1y ago
I left the U.S. several years ago and have completely forgotten about "credit scores" in this sense. I get reminded every once-in-a-while how things that used to feel so obvious and inevitable and necessary for society to function are completely artificial.
- lisper 1y ago
  Society itself is completely artificial. Money, property rights, laws, taxes, even the words I'm using to write this very comment... all of these are just human inventions, reified mythology.
  - thomascountz 1y ago
    What struck me about credit scores is that, from the outside, it seems so obviously ripe for corruption and predation. But growing up, it just felt that it was the way things had to be; how could it possibly be different?
    - altacc 1y ago
      > how could it possibly be different? This is the aim of every culture & political system: to remove the ability to even consider that other ways of doing things are possible and that other countries doing things differently are terribly flawed compared to the paradise you live in.
  - jmcqk6 1y ago
    It's useful to remember this when tempted to make arguments that assume there is a Right Way to do things. We are exploring a massive possibility space where components interact in non-linear ways. There isn't a right way, there is no golden path. The reality of our society is an integration of each individual experience. We build theories as abstractions of that integration in order to manage and engage with that massive complexity. It can be useful, as long as we remember that they are abstractions. When we forget that our abstractions are only abstractions, we tend to cause additional problems on top of that which we were already trying to engage.
highwayman47 1y ago
The only appeal of these loans is that they weren’t incorporated into FICO score. These companies will all fail once people start noticing their scores drop.
Glyptodon 1y ago
That seems like it makes sense whatever one think of credit scores, it's actually surprising to me that a form of credit didn't show previously.
veggieroll 1y ago
Ok, do rent next. Paying rent doesn't count towards your credit score (at least it didn't a decade ago when I was getting my mortgage). And it's a glaring signal of how the system isn't built for what it claims: evaluating your ability to pay obligations on time. No, the system is built to trap people in poverty and enrich the rentier class.
- nwah1 1y ago
  Landlords like the idea of incorporating rent payments into credit scores, since it adds extra incentive to pay on time. Or, phrased differently, extra punishment for failing to pay on time. Framing the current default as a help to the rentier class is just silly. The rentier class are indeed a major cause of stagnation and inequality in our economy, but they are innocent of this one.
  - gamerdonkey 1y ago
    The current default is that missing a rent payment can harm your credit score, but paying on time will never improve it. https://www.experian.com/blogs/ask-experian/can-late-rent-payments-hurt-my-credit-score/ https://www.experian.com/blogs/ask-experian/can-late-rent-pa... This benefits the landlords for the reasons you outlined, and tenants must interact with the credit industry through additional (often predatory) means in order to build a credit history that may allow them to buy their own home. Further, landlords have an incentive against providing this positive feedback, as doing so makes it more likely that tenants would exit a relationship that is profitable to the landlord.
    - veggieroll 1y ago
      Thank you for explaining this issue in more detail.
- daft_pink 1y ago
  Is having your payments reported to a credit bureau really a benefit to you to allow you to have a better credit or is it a collection activity intended to help the creditor collect? The reason buy now pay it later is being added, is because those lenders are having trouble collecting, so they want to add it to the credit score so there is an additional consequence if they don’t get paid. It’s a collection activity, not something that’s designed to help the payor. Adding rent is mostly a benefit to the landlord not to the poor people.
curtisszmania 1y ago
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kylehotchkiss 1y ago
Aww so I can't use BNPL for my $10 California burrito anymore? I was looking forward to 4 $2.50 weekly payments!
- thebeardisred 1y ago
  Man, I wish for a $10 California burrito. In Los Angeles I'm often looking at $5+ tacos.
zoklet-enjoyer 1y ago
I always take on debt if it's an option at 0%. Or sometimes even if it's a low promo thing, like 3%.
- chasd00 1y ago
  I do that too, I actually get a kick out ripping off those predatory 0% interest traps. I had no idea the BNPL things didn’t impact credit scores. If they’re unsecured with no credit worthiness impact then why even pay them back?
deleted 1y ago
[deleted]
nailer 1y ago
I honestly have no idea whether buy now pay later is considered good or bad. The article is email-walled so I don’t know. I was fiscally responsible and didn’t buy things on credit. I had a low credit score. Now I deliberately pat for things on credit then pay them off immediately to have a high credit score. Maybe we could replace credit score with an actual measure of financial responsibility?

282 points by cebert 1y ago

What's interesting here is that normally BNPL only does a soft check. I wonder if this is going to change. Equally, I find it weird that companies can ding your credit for not paying but have no obligation to report on-time payments. It should be both or none.

hopelite 1y ago
Technically it is largely already built in as an assumption that payments are made on time. You also don’t lend to a friend you will not be paid back by, will you? The credit score reduction is merely a diversion from norm, i.e., the expectation that you pay what you agree you owe. Ironically, there is actually zero reward for being a reliable person, there is only a punishment for being an unreliable person; and with all the money printing, even the punishment for being an unreliable person has been almost totally removed and being reliable and upstanding is effectively a punishment since you don’t get to live like a king on a shoe string and then declare bankruptcy and have credit extended to you immediately afterwards because money is cheapened and consequences are void.
- DrillShopper 1y ago
  > You also don’t lend to a friend you will not be paid back by, will you? I don't lend to friends and family. It's not worth losing those bonds over. I'll help financially where I can, and I'm not going to stop anyone paying me back, but I'm assuming that money is just gone. Completely different calculus compared to credit.

firesteelrain 1y ago

Credit scores will tank further

milesrout 1y ago
[dead]
ZYbCRq22HbJ2y7 1y ago
Why? "The industry has long believed that consumers using BNPL responsibly should result in positive credit scores, as the majority of users are paying back in full and on time."
- steveBK123 1y ago
  Because "most people pay back fully on time" is not the metric. The real question is what are the delinquency and default rates for BNPL as compared to other forms of consumer credit. Given the previous understanding that it didn't hit your FICO, the retailer subsidy as a sales lead, and the types of products people were financing.. one might assume worse..
- firesteelrain 1y ago
  Because it’s shadow debt and it will show the person as overleveraged with a bunch of Affirm loans
UltraSane 1y ago
If customers make every payment their score should improve.
- dh2022 1y ago
  What is the benefit for a consumer to use this type of loan and then pay it back on time versus using a credit card and then paying the card back on time? To me this seems like a new product that would target a different consumer than the one that makes payments on time. But I would like if someone challenges this view. Thanks!
  - loeg 1y ago
    > What is the benefit for a consumer to use this type of loan and then pay it back on time versus using a credit card and then paying the card back on time? Slightly longer repayment time frames. (Multiple months instead of just one.)

jppope 1y ago

thats interesting. I was always wondering what the hustle was, guess that was it- it was outside of the credit system

NewJazz 1y ago
It already shows up when mortgage lenders do their checks, AIUI.
- hopelite 1y ago
  The irony is that it does not even really matter anymore at this stage, especially with mortgages. So you get a few points taken off because you have 800 vs 600 score, but it won’t really make a difference when both are on the same out of control roller coasters where house prices have increased by 100% in 7 years.
  - nradov 1y ago
    US home prices haven't increased by 100% in 7 years. On a national basis, the Case-Shiller index has only increased by 65% (nominal dollars, not inflation adjusted). https://fred.stlouisfed.org/series/CSUSHPINSA https://fred.stlouisfed.org/series/CSUSHPINSA In the short term, the difference in mortgage interest rates between prime versus subprime loans can have a major impact on borrower cashflow and the type of property they can afford.
    - hopelite 1y ago
      I’m not sure why you would rationalize things so much. Yes, the biased Case-Shiller shows that the avg is only up 65% (think about that!!! 65%!!!) which is kept suppressed by the prices only increasing far slower in places where no one wants to live because there are no opportunities. I know first hand that prices have doubled in the places people want to live because all the money has pooled there through all the money printing fraud. It’s not even hard to see if you simply look yourself, not rely on some intentionally moderating Case-Shiller index. So again, why do you make excuses for 65% increases because it’s not 100%?????? 65%, my man!

ecshafer 1y ago

This would probably only affect the people with the worst credit scores I imagine. I just don't see a ton of 800+ credit score people deciding to spend 5 payments of $20 for a pair of $80 shoes.

loeg 1y ago
Plenty of people with good credit use BNPL loans; they are offered on much higher cost items than $80.
- quickthrowman 1y ago
  1.5% back on the purchase via CC rewards beats earning 1% over 3 months (4% yield) in a HYSA every time, anyone using BNPL is using them suboptimally. For a 3 month BNPL loan to be worth it, HYSA rates must be over 6%, and actually a bit more due to the time value of money; you get CC reward cash after the statement period but it takes 90 days (and up to ~120 days) to get three monthly interest payments.
  - loeg 1y ago
    Maybe you replied in the wrong place? This isn't responsive to my comment.
    - quickthrowman 1y ago
      No, I was replying to your comment. Using a BNPL loan is less optimal than paying with a credit card due to the cash back rewards. People with good credit may use them, but it makes zero sense to do so. You always come out ahead by using a credit card and paying it off immediately unless the high yield savings rate is 6% or higher assuming a BNPL loan term of 3 months. Beyond that, it does make sense to use them, like Apple’s 12 month no interest on Apple products with the Apple Card.
      - loeg 1y ago
        I don't think a discussion of optimality is relevant to what I wrote. Lots of people with good credit are not maximizing credit card rewards and sign-up bonuses, either. Humans are not homo economicus. (And just as a factual matter, there are sometimes longer BNPL terms than 3 months, which changes the math on what is "optimal.")

seatac76 1y ago

It probably makes sense to do so. Not that I condone the FICO hustle. But small loans can add up quickly and delinquencies need to be measured for financial market stability.

kurthr 1y ago
If you're paying for your food delivery on an installment plan, you're probably going to have a blow up. https://www.nytimes.com/2025/03/23/business/doordash-klarna-payments.html https://www.nytimes.com/2025/03/23/business/doordash-klarna-...
- hopelite 1y ago
  The worst part is that it will equally affect all the responsible people when it blows up just like it is affecting them now when BNPL is just one more way in which demand is artificially created that drives up prices.
- 2OEH8eoCRo0 1y ago
  I don't understand people. If you need to use an installment plan why the hell are you using DoorDash which is a luxury ripoff? I can afford it but I don't use it because it's obscene. I'm tempted to say that some people are poor because they're imbeciles with poor financial sense.
  - ProllyInfamous 1y ago
    >using DoorDash ... is a luxury ripoff I live in a working-class neighborhood and it blows my mind how often DoorDash visits my neighbors (particularly considering there are dozens of restaurants within one mile). The only time I encourage delivery service is when we're too intoxicated to drive.
    - pests 1y ago
      I stayed with distant family for a bit around COVID when everyone was WFH. Him and his wife must have gotten 3-5 DoorDash deliveries a day pretty reliably, I was blown away. Each ordering their own thing from different restaurants. Random “I want a donut from 711 at 1am” where I’m sure fees/tip were multiples of the actual food cost. Sometimes the different drivers would arrive at the same time and we’d have a little jam up on the porch.

PostOnce 1y ago

Theoretically, credit should be used for one thing: to make more money. (not less) However, instead of using it to buy or construct a machine to triple what you can produce in an hour, the average person is using it to delay having to work that hour at all, in exchange for having to work an hour and six minutes sometime later. At some point, you run out of hours available and the house of cards collapses. i.e., credit can buy time in the nearly literal sense, you can do an hour's work in half an hour because the money facilitates it, meaning you can now make more money. If instead of investing in work you're spending on play, then you end up with a time deficit. or, e.g. you can buy 3 franchises in 3 months instead of 3 years (i.e. income from the 1 franchise), trading credit for time to make more money, instead of burning it. It'd have been nice had they taught me this in school.

Neywiny 1y ago
I think that's a bit disingenuous. It's not always delaying work. There's only so much time and there are some people who cannot afford to live with the time in the day, the skillset they have, and the market conditions (both income and expenses). Your tone and word choice shows you don't understand the problem at all. If somebody can BNPL or otherwise credit lifesaving medicine (such as the many people in the USA who die from inability to afford healthcare), that's not play money because they don't want to work.
- PostOnce 1y ago
  Obviously there are edge cases. Debt can be a form of insurance for the individual. However, I stood in line behind someone who financed a bowl of noodles with afterpay, and it got me thinking. Those are the folks I'm talking about.
  - Neywiny 1y ago
    Sure, but could that not be an edge case? I'd imagine most people aren't sharing the sadder parts of their life. Or, is it possible they spent the rest of their money on everything more important? Could be argued they should cook at home but still.

deleted 1y ago

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janalsncm 1y ago

What is the functional difference between BNPL and credit cards that can explain why it’s become popular? A credit card is literally “buy now pay later” so is it just the ease of onboarding?

scarface_74 1y ago
Fixed payment schedule and no interest being charged.
- SoftTalker 1y ago
  For most of them, interest accrues from the date of purchased but is not charged if you pay on time. If you don’t, you owe all the back interest from day one.
  - Tadpole9181 1y ago
    Ah, that's the scam. Yet another poor tax, then? The rich get interest on money they already spent, the poor get an illusion of safety followed by even more destitution?
    - scarface_74 1y ago
      That’s not how BNPL works in its modern form with the third party companies. You pay late fees if you pay late. If you have a 3 month plan, they divide the payment into three equal installments and you pay it off. The parent poster is confusing BNPL with cobranded cards like Room 2 Go credit cards that have special promotions with “0% for x months”. It’s a regular credit card where the minimum payment won’t guarantee that you pay the original amount off in “x” months, but you only have to pay 2% of the balance. These have always shown up on your credit report. They are “deferred interest” plans where if you don’t pay the balance off in $x months it will charge you back interest.
    - drexlspivey 1y ago
      Ah yes, the big scam of offering zero interest unsecured loans to anyone without even running a credit check. These companies are bound to have big losses when things go south because they literally offer you free money.

bediger4000 1y ago

FICO scores are a joke. They hint at what they use to calculate them, but the algorithms are kept secret. Fair Isaac can't reveal the algorithms, otherwise they'd get gamed. Incentives to keep bad info and wrong info in dossiers are strong, too. If allowed, Fair Isaac would put rumors and other bullshit on n your file, and never take it out.

mritchie712 1y ago
the score is easy to reverse engineer if you have the data and pretty much every big bank has the data. source: I worked at a big bank and did this, it was easy. Most of the stuff is obvious and intuitive (don't make late payments). One that's not terribly intuitive is credit line utilization. It has a big impact and most people don't think about it. For example, it's better to have 2k in credit card debt if you have 20k in credit lines vs. 1k in debt on 2k in credit lines.
- astura 1y ago
  >the score is easy to reverse engineer if you have the data In fact, FICO even provides you with a tool to "reverse engineer" a credit score given the data. https://www.myfico.com/fico-credit-score-estimator/estimator https://www.myfico.com/fico-credit-score-estimator/estimator
- xyst 1y ago
  You forget the scoring is not based on individual performance only. It also includes your performance compared to those in similar groups or buckets. Ever wonder why your credit score goes down randomly in one month despite nothing changing? FICO’s black box algorithm put you in a newer credit group of higher credit scores. In that group, your profile scored much lower compared to others. Thus you get a 10-20 point deduction. If you have a long history of good credit it probably doesn’t matter. But if you are a young person looking for auto/home mortgages, that 10-20 pt dedication _could_ lead to slightly higher APRs depending on the underwriters own scoring algorithm.
astura 1y ago
They don't really "hint at what they use to calculate them" so much as "tell you exactly what is used to calculate them, how it's calculated, and even include an estimation tool so you can calculate your score yourself" https://www.myfico.com/credit-education/whats-in-your-credit-score https://www.myfico.com/credit-education/whats-in-your-credit... >payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%). https://www.myfico.com/fico-credit-score-estimator/estimator https://www.myfico.com/fico-credit-score-estimator/estimator For fucks sake, at least keep your conspiracy theories somewhat believable. Absolutely nobody is worried about "gaming" credit scores because the activities to "game" credit scores are identical to the activities that make you likely to pay off debt in the future and that's what a credit score measures. So it doesn't matter if you pay off your bills to "game" or to be responsible, you're still paying off your bills.

mihaaly 1y ago

The security and privacy nighmare that the various credit score systems bring on by collecting and storing sensitive data on individuals some way somewhere with some sort of access for someones for something (a very real big brother in esence on essentials matters), is a good incentive keeping people away from loans. The less is more in this case. Avoiding avoidables. The crime is that in the very essential case of abode it is impossible to avoid for the generic population. Both renting and mortgages require you do disclose your life for organizations and sometimes individuals having financial incentives with you. Making you exposed and voulnarable, no choice is given. It is a must (you and your dependants cannot choose not to live somewhere). So they do not have to risk their capital gain, allowed to risk your most sensitive personal data.

focusgroup0 1y ago

Why do some ancient traditions ban usury?

mcherm 1y ago
I suspect actually MOST ancient traditions ban usury (or ban lending altogether). Christianity banned usury, Islam banned essentially all lending, Hinduism banned some casts from lending and regulated the lending of others[1]. I think the practice was found to be corrosive to societies and thus at one point or another many of them tried to ban it. (Lending is also very helpful for commerce, so most societies also reintroduced it. Actual practice varied at different points in history.) 1. https://www.sacred-texts.com/hin/sbe14/sbe1405.htm https://www.sacred-texts.com/hin/sbe14/sbe1405.htm
- scarface_74 1y ago
  If you look up the various means of buying home without having all of the money up front that are compliant, it’s just a mortgage by different name. https://www.guidanceresidential.com/resources/faith-based-financing/what-is-an-islamic-mortgage-and-how-does-it-work/ https://www.guidanceresidential.com/resources/faith-based-fi...
- groos 1y ago
  All Abrahamic faiths ban lending where the returned amount is greater than that borrowed, i.e. charging interest. Judaism "worked around" it by banning it amongs Jews but allowed lending on interest to non-Jews. Christianity originally followed Jewish law in this regard but abandoned it later on. Islam, adheres to banning interest strictly, but this is subject to different interpretations. E.g., buying an item at a higher price but paying in installments is allowed by some schools of jurisprudence, while others disallow it, while there is unanimous condemnation of a loan whose interest "doubles and redoubles" [explicit in the Quran], which is the typical credit card or mortgage. The main difference in buying at a higher price + installments from a conventional interest based lone is that the profit gets agreed to at sale, and it holds regardless of whether the full payment is made early or not. Muslims have got around the problem of not being able to pay for houses in cash by constructing a joint ownership scheme, where the lender and buyer enter into a joint ownership of the house; the buyer pays rent and adds extra to buy more equity, and the rent goes to both the buyer and lender in proportion to their equity as a business partnership. Over time, the rent part decreases and the equity buying accelerates. There are other models, but this is the most popular one. Due to Federal and state laws, such mortgages are often reported with interest rates even though, technically, interest is not being charged.

Yizahi 1y ago

They didn't before? It's a credit like any other type, increasing debt burden like any credit. Seems like corru... ahem, lobbying of course. :)

Hamuko 1y ago
They can't keep up with techbros coming up with new names for debt.
hobs 1y ago
Read the article and approach, the BNPL is going to be in effect like one credit card opened per transaction.
fHr 1y ago
Yep you're onto something here but surely they operate within legal reasonable frameworks of the government surely.
- byteknight 1y ago
  Regardless no one can make you buy anything
therealpygon 1y ago
They also didn’t destroy people’s credit when they got upside down and had to return the $5k couch or $15k car they were talked into buying on their fixed income, but that’s usually “other people” problems.
- ricardbejarano 1y ago
  Being "talked into" is one hell of an excuse not to take accountability for your own purchases.
  - cyanydeez 1y ago
    If the DOD can't do it, why should poor people? https://americanmilitarynews.com/2024/11/pentagon-fails-7th-audit-cant-fully-account-for-824-billion/ https://americanmilitarynews.com/2024/11/pentagon-fails-7th-...

eagerpace 1y ago

How long until my score goes down because I don’t use these?!??

ProllyInfamous 1y ago
Background: During the riskiest span of my life, financially, I used to have a 780+ score and an AMEX Gold (for about a decade, early 2000s); now I don't have any credit cards, my vehicles are entirely paid. My Conclusion: Credit scores demonstrate ability to re-pay interest (i.e. lender profits); it is a score that demonstrates how profitable you might-could-be, not necessarily representative of fiscal wisdom. Meditation: not caring about your credit worthiness is a fantastic approach to life, as long as you've already bought your house (or have alternate plans, not involving a mortgage).

hk1337 1y ago

This seems like it’s going to harm more people than help. Encouraging fiscal irresponsibility under the guise of improving your credit score. All it’s really going to do is give lenders another metric to deny you a loan, either because of delinquent accounts or too many accounts opened and closed.

xyst 1y ago
Maybe not deny in case of too many accounts opened or closed but risk profile can change. So think higher APRs compared to people without bnpl.

__mharrison__ 1y ago

Circular much?

__mharrison__ 1y ago
For the downvoters... having worked in this industry, these loans are already heavily modeled with FICO scores. Who is wagging which tail?

9cb14c1ec0 1y ago

Good, it will bring the stupid BNPL ecosystem back to earth, when people stop using it as free money.

xyst 1y ago

yet another vague data point mortgage underwriters can use to deny your loan In corporate back room, "persons score is high enough to qualify and income is good enough but there’s a strong history of bnpl usage. Over 200 accounts ranging from food to groceries and luxury items. Risk to default has increased, thus approval for slightly higher APR compared to peers with none to lower BNPL usage.” Rinse and repeat this for hundreds of thousands of loans and now bank is raking in (more) profits

wat10000 1y ago
How do banks make more profit by issuing fewer mortgages?

segmondy 1y ago

So are some of us going to get penalized for not having a buy-now-pay-later history?

asdfasvea 1y ago
Depends on your definition of 'penalized'. FICO is all about identifying good ROI candidates. Say you are a lender, you want someone who constantly uses credit, always pays their bills and has the capacity take on new debt. That's what FICO is for. It's not some consumer reward system. It's not your score to game, it's a score on you for companies to game. Quit playing the game. Credit score NULL.
- benmanns 1y ago
  IMO the game is to get the highest credit score while spending the least on credit. That way if you e.g. need to acquire housing, a reliable vehicle, business loans, even employment or insurance, you will be able to and can get a good deal. Sure, paying nothing saves you money, but it also costs you the opportunity cost between what you could earn/save by utilizing credit vs waiting months to years to save up and pay cash.
  - hedora 1y ago
    The easiest approach is to get high point credit cards and pay them off each month. That way, you don’t pay anything (and are subsidized). Of course the money comes from people that don’t do this, and vendors’ margins. So, it’s “Participate in the credit card racket or no house for you” on one side and “That’s a nice shop you have there. It’d be a shame if something happened to it.” on the other. The US really should abolish the credit rating industry.

alkonaut 1y ago

Does anyone else live in a place where there isn't a visible "score" for how valuable you are, but rather only a "credit check" for how risky you are, which is performed if you apply for new credit (buying anything with an invoice, getting a credit card, or taking any other kind of loan)? Meaning that if you have a good income and no history of failing payments, you are basically passing the check with flying colors, and will have the same "score" as someone who has had tons of well-served credit before? This thing where the score as in "risk" and score as in "business opportunity for lenders" is intertwined, and creates weird incentives for consumers, is that only a US thing or do any other countries have something similar?

ch4s3 1y ago
Credit scores aren't a score of how valuable you are, they're a score of creditworthiness or how unlikely you are to default on a loan. The largest factors are age of credit and payment history. Utilization is also a factor. Someone who occasionally misses payments and has high utilization is going to be more profitable but higher risk to lend to.
- parpfish 1y ago
  Just because that’s what a scores is designed to do it doesn’t mean that’s what businesses use it for downstream. The fact people always debate what a credit score really means suggests that there are too many factors rolled up into a single number when we should really have a few distinct sub-scales. Anybody that has made a dashboard for a ceo with a short attention span that refuses to deal with nuance and just wants to see “a number” knows this problem all too well
  - ch4s3 1y ago
    I agree in general, but a credit score absolutely DOES NOT tell you how profitable someone is to lend to, and in general someone with a very high credit score is a very low margin customer.
    - 1y ago

charles_f 1y ago

For the line to go up you need people to keep buying more, and reducing costs. But when these costs are people's salary, you end up paying them less, so they can't buy more, thus credit. The overreliance on credit as a new step in the consumption cycle is an indicator that the whole system is collapsing, but somehow it's supposed to be good news that buying a burrito might be used against you to further drawn you down. The town is on fire but good news, your house being burned down will get you air-miles.

thomascountz 1y ago

I left the U.S. several years ago and have completely forgotten about "credit scores" in this sense. I get reminded every once-in-a-while how things that used to feel so obvious and inevitable and necessary for society to function are completely artificial.

lisper 1y ago
Society itself is completely artificial. Money, property rights, laws, taxes, even the words I'm using to write this very comment... all of these are just human inventions, reified mythology.
- thomascountz 1y ago
  What struck me about credit scores is that, from the outside, it seems so obviously ripe for corruption and predation. But growing up, it just felt that it was the way things had to be; how could it possibly be different?
  - altacc 1y ago
    > how could it possibly be different? This is the aim of every culture & political system: to remove the ability to even consider that other ways of doing things are possible and that other countries doing things differently are terribly flawed compared to the paradise you live in.
- jmcqk6 1y ago
  It's useful to remember this when tempted to make arguments that assume there is a Right Way to do things. We are exploring a massive possibility space where components interact in non-linear ways. There isn't a right way, there is no golden path. The reality of our society is an integration of each individual experience. We build theories as abstractions of that integration in order to manage and engage with that massive complexity. It can be useful, as long as we remember that they are abstractions. When we forget that our abstractions are only abstractions, we tend to cause additional problems on top of that which we were already trying to engage.

highwayman47 1y ago

The only appeal of these loans is that they weren’t incorporated into FICO score. These companies will all fail once people start noticing their scores drop.

Glyptodon 1y ago

That seems like it makes sense whatever one think of credit scores, it's actually surprising to me that a form of credit didn't show previously.

veggieroll 1y ago

Ok, do rent next. Paying rent doesn't count towards your credit score (at least it didn't a decade ago when I was getting my mortgage). And it's a glaring signal of how the system isn't built for what it claims: evaluating your ability to pay obligations on time. No, the system is built to trap people in poverty and enrich the rentier class.

nwah1 1y ago
Landlords like the idea of incorporating rent payments into credit scores, since it adds extra incentive to pay on time. Or, phrased differently, extra punishment for failing to pay on time. Framing the current default as a help to the rentier class is just silly. The rentier class are indeed a major cause of stagnation and inequality in our economy, but they are innocent of this one.
- gamerdonkey 1y ago
  The current default is that missing a rent payment can harm your credit score, but paying on time will never improve it. https://www.experian.com/blogs/ask-experian/can-late-rent-payments-hurt-my-credit-score/ https://www.experian.com/blogs/ask-experian/can-late-rent-pa... This benefits the landlords for the reasons you outlined, and tenants must interact with the credit industry through additional (often predatory) means in order to build a credit history that may allow them to buy their own home. Further, landlords have an incentive against providing this positive feedback, as doing so makes it more likely that tenants would exit a relationship that is profitable to the landlord.
  - veggieroll 1y ago
    Thank you for explaining this issue in more detail.
daft_pink 1y ago
Is having your payments reported to a credit bureau really a benefit to you to allow you to have a better credit or is it a collection activity intended to help the creditor collect? The reason buy now pay it later is being added, is because those lenders are having trouble collecting, so they want to add it to the credit score so there is an additional consequence if they don’t get paid. It’s a collection activity, not something that’s designed to help the payor. Adding rent is mostly a benefit to the landlord not to the poor people.

curtisszmania 1y ago

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kylehotchkiss 1y ago

Aww so I can't use BNPL for my $10 California burrito anymore? I was looking forward to 4 $2.50 weekly payments!

thebeardisred 1y ago
Man, I wish for a $10 California burrito. In Los Angeles I'm often looking at $5+ tacos.

zoklet-enjoyer 1y ago

I always take on debt if it's an option at 0%. Or sometimes even if it's a low promo thing, like 3%.

chasd00 1y ago
I do that too, I actually get a kick out ripping off those predatory 0% interest traps. I had no idea the BNPL things didn’t impact credit scores. If they’re unsecured with no credit worthiness impact then why even pay them back?

deleted 1y ago

[deleted]

nailer 1y ago

I honestly have no idea whether buy now pay later is considered good or bad. The article is email-walled so I don’t know. I was fiscally responsible and didn’t buy things on credit. I had a low credit score. Now I deliberately pat for things on credit then pay them off immediately to have a high credit score. Maybe we could replace credit score with an actual measure of financial responsibility?