Four in 10 Americans have used a buy-now-pay-later (BNPL) provider like Klarna, Affirm, or Afterpay to put purchases from handbags to burritos on installment payment plans. But for a long time, those payment plans have been a blind spot for credit-reporting bureaus that were more concerned with traditional credit like credit cards or student loans. That’s changing in a big way.
Affirm, which has 21 million users, started reporting customers’ activity to Experian on April 1. While the information won’t be used for consumers’ scores “in the near term,” it may be “in the future as new credit scoring models are developed,” the companies said in an announcement.
“This is the right thing to do for consumers, the industry and the economy at large,” Scott Brown, group president of financial services at Experian North America, said in the announcement. (An Experian spokesperson told Fortune, without specifying a date, that once “BNPL information is more widely reported to Experian from other leading BNPL providers, a consumer’s BNPL history will be visible to lenders” as part of a credit report.)
The other two credit reporting bureaus, TransUnion and Equifax, have made similar moves. TransUnion collects some term loan data from Klarna, which has the bulk of the BNPL market, and has been collecting BNPL data broadly since last year. While it’s currently only visible to consumers, eventually, the lenders who buy and use credit reports will be able to “turn on” this data and use it to evaluate consumers’ creditworthiness. (A Klarna spokesperson told Fortune the data sent to TransUnion currently only includes longer-term loans, not the company’s popular four-payment plans.) Equifax, meanwhile, has made it possible for BNPL providers to report payments since 2022.
And Fair Isaac Corporation, which develops the FICO score used by the largest lenders, has partnered with Affirm to incorporate its data into consumers’ scores, company CEO William Lansing said on an earnings call last month.