BNPL headed for credit reports
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Buy-now-pay-later purchases are poised to begin affecting consumers' credit histories.
Why it matters: BNPL was initially left off of credit reports, but critics say that left credit agencies with an inaccurate picture of consumers' financial health.
Driving the news: Starting Tuesday, BNPL giant Affirm is reporting all of its short-term interest-free installment loans to the credit reporting agency Experian.
Between the lines: The loans will not immediately factor into consumers' traditional credit scores, Affirm says — though they may down the line as new credit scoring models are developed.
- In the immediate term, the move will do two things, the company says: help lenders make more informed decisions before extending credit, and help consumers build their credit histories.
The big picture: Short-term BNPL usage has grown significantly in recent years, especially for people under 44.
- And BNPL services are expanding to every corner of retail.
Case in point: DoorDash announced in March that it's adding Klarna's BNPL payment options into its delivery app in the coming months.
What's next: "Other lenders and credit bureaus may soon follow suit," the Wall Street Journal reports. "TransUnion, for example, has started collecting data from two BNPL providers and says it is working to make the information available to consumers and lenders soon, once it has a more complete data set."
- Klarna tells Axios it's not sharing data with U.S. credit bureaus, "as they currently lack appropriate models to responsibly handle BNPL data to ensure positive consumer outcomes."
Editor's note: This story has been corrected to remove a CreditCards.com survey that cited Klarna and to clarify that Klarna is not yet operating on DoorDash nor submitting its data to U.S. credit bureaus.
