(InvestigateTV) — Buy Now, Pay Later has surged in popularity, with more than half of Americans saying they’ve used the service, according to a new NerdWallet survey.
And this fall, a big change is coming. FICO, the company behind the most widely used credit scoring system, will begin factoring BNPL payment histories into its credit score calculations.
Sara Rathner, a credit card expert with NerdWallet, said consumers shouldn’t expect an overnight shift.
“If you’re somebody that has been using buy now, pay later plans, sometimes even having more than one at once, and you’ve been diligent in paying them off,” Rather laid out, “you might notice a change in your credit score at some point, but you also need to recognize how slowly changes come to credit scoring and credit application evaluation.”
She said there are lots of different scoring models that lenders use when they’re evaluating applications for loans.
She pointed out that loan processors are trying to gauge how likely it is an applicant is going to pay on time each month. She added that it takes a very long time for lenders to adopt new scoring models.
“Some are used for mortgage applications,” Rathner explained. “Others are used for credit cards, and so really what we would need to see are a large amount of lenders adopting this brand-new FICO scoring model in the future, in order for you to notice that your buy now, pay later payments are making a difference when it comes to your loan applications.”
While the system may be slow with information that could help credit scores, making a late payment will quickly hurt them.
So, Rathner urged BNPL users to keep making it a strict priority to get all loan payments in on time.
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