How Buy Now, Pay Later Affects Your Credit Score?

Buy Now, Pay Later (BNPL) services have transformed how consumers shop, offering a flexible way to manage purchases without immediate full payment. These services allow you to split costs into installments, often interest-free if paid on time, making them appealing to a wide audience, particularly low- and middle-income shoppers, millennials, and Gen Z. According to the Federal Reserve, 15% of American adults used BNPL in 2024, with an average loan size of $142 in 2022. However, as of 2025, major credit scoring companies like FICO are incorporating BNPL data into their models, meaning your payment behavior can now directly impact your credit score. This guide explores what BNPL is, how it works, its effects on your credit score, and how to use it wisely to maintain or improve your financial health.

What is Buy Now, Pay Later?

Buy Now, Pay Later (BNPL) is a short-term financing option that lets consumers purchase items and pay in fixed installments over weeks or months. Popular providers include Affirm, Afterpay, Klarna, and PayPal’s “Pay in 4.” Unlike traditional loans, BNPL often requires no or only a soft credit check, which doesn’t affect your credit score, and many plans are interest-free if payments are made on time. For example, a $200 purchase might be split into four $50 payments due every two weeks. BNPL is especially popular among younger generations and those with limited credit history, as it provides an accessible way to manage cash flow for small to medium-sized purchases.

The Federal Reserve notes that BNPL is widely used by low- and middle-income consumers, Black and Hispanic individuals, and women, with 15% of U.S. adults using it in 2024. The average loan size was $142 in 2022, reflecting its use for everyday purchases like clothing or electronics.

How BNPL Affects Your Credit Score

Historically, BNPL loans were not reported to credit bureaus, meaning they had little direct impact on credit scores. However, this has changed significantly in 2025, with FICO incorporating BNPL data into its scoring models (FICO Score 10 and FICO Score 10 T). This shift, combined with some providers reporting payment activity, means BNPL can now influence your credit score in several ways.

Credit Reporting by BNPL Providers

FICO’s Inclusion of BNPL Data

In June 2025, FICO announced it would include BNPL loan data in its scoring models, providing lenders with a clearer view of consumers’ repayment behavior. A FICO study with Affirm data found that BNPL’s impact on credit scores typically stays within 10 points up or down for over 85% of consumers, meaning it’s unlikely to cause drastic changes but can still make a difference over time.

Positive Impacts:

• Credit Building: On-time BNPL payments can help establish a positive payment history, especially for those with limited credit, potentially generating a FICO score for first-time users.

• Credit Mix: BNPL installment loans diversify your credit types, which can positively affect the 10% of your FICO score tied to credit mix.

Negative Impacts:

• Missed Payments: Late or missed payments, reported by 24% of BNPL users in 2024 per the Federal Reserve, can harm your payment history (35% of FICO score) and lead to collections if overdue by 90–120 days.

• Short-Term Loans: BNPL loans, often lasting six weeks, can lower the average age of your credit accounts (15% of FICO score), potentially reducing your score.

• Multiple Loans: Frequent BNPL use may result in various accounts or hard inquiries, impacting the “new credit” factor (10% of FICO score).

Case Study Example:
A consumer with a 700 FICO score takes a $200 BNPL loan, paying four $50 installments over eight weeks. Timely payments reported by Affirm could slightly boost their score by improving payment history and credit mix. However, a missed payment could lower their score due to a negative payment history. For someone with no credit history, consistent on-time payments could help establish a credit score.

Benefits and Risks of BNPL in Terms of Credit Scores

Benefits

• Credit Building for New Consumers: BNPL offers an accessible way for those with no or limited credit history to build a positive payment record, especially with providers like Affirm that report to bureaus.

• Improved Credit Mix: Adding installment loans like BNPL can enhance your credit mix, a minor but positive factor in credit scoring.

• Convenience and Flexibility: BNPL allows manageable payments for larger purchases, reducing financial strain if used responsibly.

Risks

• Overspending: The Consumer Financial Protection Bureau (CFPB) found that over 60% of BNPL borrowers in 2022 had multiple simultaneous loans, increasing the risk of debt accumulation.

• Late Payment Penalties: Missed payments can lead to fees and negative credit reporting, with potential score drops if reported.

• Inconsistent Reporting: Varying reporting practices among providers can confuse consumers, though this is improving as more providers report to bureaus.

• Consumer Protections: Unlike credit cards, BNPL loans may lack robust dispute resolution, leaving consumers vulnerable to merchant issues. The CFPB issued dispute rights rules in 2024, but enforcement was scaled back in 2025.

Tips for Using BNPL Wisely

To protect and potentially improve your credit score while using BNPL, follow these strategies:

1. Read the Terms: Check if the provider reports to credit bureaus and whether they use soft or hard credit checks. Hard inquiries may cause a small score dip (up to 5 points).

2. Pay on Time: Set up automatic payments or reminders to avoid late fees and negative credit impacts.

3. Limit BNPL Loans: Avoid multiple simultaneous loans to prevent overextension and excessive inquiries or credit utilization.

4. Monitor Your Credit Report: Check your report regularly at annualcreditreport.com to ensure accurate BNPL reporting.

5. Use for Necessities: Reserve BNPL for planned, affordable purchases rather than impulse buys.

6. Explore Alternatives: Consider credit cards or saving up if BNPL’s credit impact concerns you.

Frequently Asked Questions (FAQ)

1. Does using BNPL affect my credit score?
   It depends on the provider. Affirm and Apple report to bureaus, impacting your score, while Afterpay and some Klarna plans do not.

2. Can BNPL help build my credit score?
   Yes, on-time payments reported to credit bureaus can improve your payment history and credit score, especially for those with limited credit.

3. What happens if I miss a BNPL payment?
   Late payments may incur fees and, if reported, can lower your credit score. Accounts overdue by 90–120 days may go to collections.

4. Do all BNPL providers perform credit checks?
   Many use soft credit checks (no score impact), but some, like Affirm for longer-term loans, may use hard inquiries, which can slightly lower your score.

5. How can I manage BNPL loans to protect my credit score?
   Pay on time, limit loans, monitor your credit report, and use BNPL for planned purchases to avoid debt accumulation.

Conclusion

Buy Now, Pay Later services offer a convenient way to manage purchases, but their impact on your credit score requires careful consideration. With FICO’s 2025 inclusion of BNPL data and increasing reporting by providers like Affirm, responsible use can help build credit, especially for those with limited credit history. However, risks like overspending, late payments, and inconsistent reporting highlight the need for caution. By understanding provider terms, making timely payments, and monitoring your credit, you can leverage BNPL’s flexibility while safeguarding your financial health. Use BNPL as part of a balanced financial strategy to maximize benefits and minimize risks.

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