Buy Now, Pay Later is incredibly popular among young consumers. Soon, they'll be able to harness this borrowing to boost their credit scores, if they pay on time.
Buy Now, Pay Later (BNPL) is a hugely popular way for younger consumers to borrow for purchases, mostly electronics, furniture and household goods, but increasingly for groceries and other essentials.
With BNPL, you buy something at an online or in-store checkout, paying a fraction of the price as a down payment. You then typically agree to pay the balance in three further, interest-free installments.
An April 2025 survey by PartnerCentric found 59% of Gen Z-ers and 58% of Millennials use it, many more than those in older age groups. And a whopping 65% of Gen Z-ers say they plan to use BNPL in 2025. Many of these will share an ambition to become homeowners eventually.
BNPL Loans Will Soon Show Up On Credit Reports
One of the attractions for younger people is that many BNPL lenders tend to conduct no or minimal credit checks. So, you're likely to get approved even if your score is low, perhaps because you're yet to borrow much. Last year, federal regulator the Consumer Financial Protection Bureau (CFPB) found nearly two-thirds of BNPL loans went to borrowers with lower credit scores.
For some, another attraction is that BNPL lenders relatively rarely report activities to credit bureaus. So, the risk to your credit score if you make late payments or skip them is low, although costly in terms of penalty fees.
But this looks likely to change soon. Earlier this week, a news release from FICO, the company behind America's most widely used credit scoring technologies, announced new versions of its software that would harvest data from BNPL lenders, incorporating it into individual consumer credit reports.
"Buy Now, Pay Later loans are playing an increasingly important role in consumers’ financial lives," said Julie May, vice president and general manager of B2B Scores at FICO. "By expanding our FICO Score 10 Suite with new models designed to incorporate BNPL data, we’re enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products. This innovation also supports our mission to expand financial inclusion by helping more consumers gain access to credit."
Meanwhile, back in March, PaymentsDive, a lending industry journal, revealed, "At least three buy now, pay later firms have begun reporting consumer data on installment financing to TransUnion or Experian [two of the Big 3 credit bureaus], and another gives customers the option of reporting that data." So, this is happening.
BNPL Credit Reporting: Two-Edged Sword For Credit Scores
BNPL loans can help thin credit profiles, but they can also hurt scores.
In fact, this new reporting could delay homeownership ambitions. Fully 41% of BNPL users say one of the top benefits of BNPL is that it does not affect their credit scores, according to PartnerCentric. That suggests they fear that their usage will harm their scores, although the survey found only 21% of users admitted to having skipped a payment.
Having a decent credit score is a precondition for getting approved for a mortgage. And any score seriously damaged by BNPL late or missed payments or defaults could take years to rebuild.
However, there are serious upsides for those who manage their borrowing well. On June 23, The Wall Street Journal noted, "Many younger consumers and new immigrants turn to BNPL before they apply for credit cards, meaning having the loans could help them build credit histories."
For responsible borrowers, having BNPL activity appear on their credit reports (and so reflected in their credit scores) could be a real plus. Paying installments on time should quickly increase their scores, helping them qualify for lower mortgage rates than they'd otherwise get.
Earlier this week, we published Renting Before Buying? Get Your Landlord to Boost Your Credit Score for a Better Mortgage Deal. It showed renters how to boost their credit scores by persuading their landlords to report their rental payments to credit bureaus.
Having rentals and BNPL activity on your credit report is a huge opportunity for those with homeownership ambitions. However, that opportunity only pays off if you make each payment on time, every time.
