Does BNPL hurt your credit score?

Does BNPL Hurt Your 💡 Definition:A credit rating assesses your creditworthiness, impacting loan terms and interest rates.Credit Score💡 Definition:A credit score predicts your creditworthiness, influencing loan rates and approval chances.? What You Need to Know

Buy Now, Pay Later (BNPL) services have become a popular payment option, but their impact on your credit score is a concern for many consumers. Traditionally, BNPL didn't affect credit scores, but changes in credit scoring models have altered the landscape. Let's explore how BNPL now affects your credit score and what you can do to manage it responsibly.

How BNPL Affects Your Credit Score

FICO💡 Definition:A three-digit credit score (300-850) calculated by Fair Isaac Corporation, used by lenders to assess creditworthiness.'s New Scoring Models

In the fall of 2025, FICO introduced new credit scoring models that consider BNPL usage. These models track several factors:

• Number of Accounts: The more BNPL accounts you open, the more it could affect your credit score.
• Frequency of Use: Regular BNPL use is now a factor in your credit profile.
• Payment History💡 Definition:Payment history reflects your record of on-time and late payments, influencing your credit score significantly.: On-time payments can help improve your score, while missed payments can lower it.

This means responsible use of BNPL can positively impact your credit score, but mismanagement can have adverse effects.

Reporting Practices

Not all BNPL providers report to credit bureaus, but some, like Affirm, report all loans to Experian. This means your BNPL activity might be reflected in your credit report, depending on the service you use.

Real-World Scenarios and Statistics

Usage Patterns and Risks

BNPL is widely used, with approximately 76% of Americans having tried it. However, nearly half of these users have missed at least one payment. For those with credit scores between 620-659, 29% have used BNPL, highlighting its prevalence among subprime borrowers. Younger consumers, aged 18-24, rely heavily on BNPL, with it constituting 28% of their unsecured debt💡 Definition:A liability is a financial obligation that requires payment, impacting your net worth and cash flow..

Financial Strain and Debt Levels

BNPL is often a cash flow💡 Definition:The net amount of money moving in and out of your accounts management tool for financially stressed individuals, particularly those with lower credit card limits. Users with limits under $5,000 are three times more likely to use BNPL than those with higher limits. Additionally, BNPL users typically carry more debt, including $5,734 more in student loans💡 Definition:A financial obligation incurred for education, impacting future finances and opportunities. and $871 more in credit card debt💡 Definition:Credit card debt is money owed on credit cards, impacting finances and credit scores. compared to their non-BNPL-using counterparts.

Important Considerations

Positive Potential

For consumers lacking traditional credit histories, BNPL can be a stepping stone to establishing credit. Responsible use and timely payments can enhance credit visibility and potentially improve scores.

Significant Risks

The combination of high BNPL adoption among lower-credit-score consumers and increased missed payment rates poses significant risks. Missed payments now have tangible consequences for credit access and borrowing costs💡 Definition:Interest rates influence borrowing costs, spending, and economic growth, affecting your finances significantly.. The Consumer Financial Protection Bureau and Federal Reserve💡 Definition:The Federal Reserve controls U.S. monetary policy to stabilize the economy and influence inflation and employment. have noted concerns about BNPL's impact, particularly on younger and lower-income💡 Definition:Income is the money you earn, essential for budgeting and financial planning. consumers already living paycheck to paycheck💡 Definition:Living paycheck to paycheck means relying on each paycheck to cover immediate expenses, making financial stability challenging..

Common Mistakes to Avoid

• Overextending with Multiple Accounts: Opening several BNPL accounts can complicate your finances and negatively impact your credit score.
• Missing Payments: Late payments are now more consequential with the new FICO models.
• Ignoring Credit Reports: Regularly check your credit report to understand how BNPL is affecting your score.

Bottom Line

BNPL can both positively and negatively impact your credit score, depending on how you use it. Responsible usage—by limiting the number of accounts, making timely payments, and understanding the reporting practices of your BNPL provider—can potentially improve your credit. However, the increased risks associated with missed payments and multiple accounts mean that consumers should approach BNPL with caution. Prioritize paying down existing BNPL balances and monitor your credit report to manage its effects on your financial health effectively.