FICO, a leading analytics company, has launched two new credit scores that incorporate consumers’ records of paying back buy now, pay later (BNPL) loans. This move aims to provide lenders with a more comprehensive sense of borrowers’ repayment history.
Currently, BNPL providers have not had a consistent approach to reporting clients’ payment history to credit reporting agencies. However, FICO’s new credit scores take this into account, recognizing that consumers may take out multiple BNPL loans in a short period, which is less common with other types of loans.
The inclusion of BNPL data in credit scores will enable lenders to evaluate credit readiness more accurately, especially for consumers whose first credit experience is through BNPL products. FICO’s vice president and general manager, Julie May, stated that “Buy Now, Pay Later loans are playing an increasingly important role in consumers’ financial lives.”
The launch of these new credit scores follows a year-long study by FICO with Affirm, a prominent BNPL provider. The move is expected to improve the accuracy of credit evaluations and provide lenders with more valuable information about potential borrowers.
FICO’s shares have seen recent gains, but are still down nearly 6% so far this year.
Source: https://www.investopedia.com/new-fico-credit-scores-incorporate-buy-now-pay-later-transactions-11759551