Equifax To Include Buy Now, Pay Later Accounts

Consumer reporting agency (CRA) Equifax will include ‘buy now, pay later’ accounts to credit reports in February 2022 according to WSJ. These types of payment programs are becoming increasingly popular with Afterpay doing $9.8 billion in payments in the 12 months ending June 30, 2021.

These buy now, pay later companies have been hesitant to report these accounts to CRAs due to the fact that these accounts are frequently opened and closed for small purchases and this frequent account opening would cause users credit scores to drop. Equifax will include both positive and negative information from these buy now pay later programs. According to an Equifax study those with a thin credit file saw their credit scores increase by 21 points on average, whereas those with a regular credit file saw their score increase by 13 points on average. It’s not clear how Equifax will treat these accounts and if they will affect scoring factors such as ‘Average Age of Accounts‘ and ‘Recent Searches for New Credit‘.

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Cap

These BNPL options are booming across the rest of the world where they don’t have as ridic algos like in the US.

I’m curious to see the following:

1. How BNPL companies report these types of accounts given: A) they can be re-used like a credit card i.e. Revolving Account B) they have fixed payments and term lengths like a loan i.e. Installment Accounts C) they might be subject to closure upon being paid-in-full like a traditional loan so there’s no getting around the annoying drop in score if it’s the only Revolving Account in a Consumer’s credit history

2. How will CRA’s treat them given that Lenders (Chase, BofA, etc.) and Payment Infrastructure companies (Visa, MC, AMEX, etc.) have been against these smaller fintechs (Affirm, Klarna, etc.) that continue to invade their space with their creativity and technology which push the lending industry further out of their control. Ask any Borrower who’s tried to rectify their credit if CRA’s and Lenders are not buttering each other’s biscuits at the expense of many Borrowers’ desire to improve their credit.

Many Lenders have been aggressively getting into the BNPL market themselves. Real headscratcher on how things will play out with BNPL reporting and complex credit algos. Even the engineers cannot explain exactly why denials are given to Borrowers – Time Since Account Opening Is Too Short. How long is long enough then because it’s been a few years already??? No clarification, just a generic Reason Code 🙁

Just another monkey wrench for Borrowers to worry about with no guidance on how to alleviate their credit issues just so some families can have a decent Christmas til they’re back on their feet.

Jason
Jason

Do/will these affect 5/24?

Jason
Jason

Might a decent bull case for buying SQ or AFRM on the dip

Otto
Otto

Hope these don’t become a necessary part of trying to maximize a credit score (like not having an open installment loan hurts your score).

Lrdx
Lrdx

I *only* have credit cards on my report and it’s usually 780+. So, no, it doesn’t matter. Already.

Jason
Jason

What you see when you go and pull your own credit report isn’t what something like a car dealership sees when they pull your credit report. I’ve run into this before, I hadn’t had a car in years and I have no other loan debt and my consumer credit report was high 700s and what the dealership pulled was low 700s.

Lrdx
Lrdx

Yes, there are multiple versions, but they are not substantially different, they are all in the same ballpark. You can see all the different credit score versions with paid credit monitoring memberships. I’ve had one for free for a year after some random security breach, and all of them were within 12 points of each other.

vc
vc

Lrdx Well, the max FICO is 850, so it’s quite possible that you’re missing out on points bc of the types of credit that you have. In fact, I’m quite sure that you are bc 10% of your score is your Credit Mix, which is the different types of credit. Credit cards is one type and installment loans is another example.

To answer OP’s question, if these are classified as Consumer Finance Accounts, they will actually hurt your score.

This whole thing is bad bc I imagine that most ppl who use these plans don’t have access to credit cards (bc of bad credit) and they likely use these plans multiple times. I also think that a lot of ppl have no clue what affects their scores. Pretty sure that the customer service reps will try to convince some customers that this will actually help their score (it may for some ppl, but in most cases, I imagine that it’ll just hurt).

Lrdx
Lrdx

At 780+, noone cares. You get approved for anything with the lowest rates possible pretty much everywhere, so why would I worry about it? (And possibly pay money through interest or origination fees?)

Keith
Keith

I cant imagine these accounts would be seen as a positive on any well established CR.. similar to how peer-to-peer lending accounts are frowned upon on a CR.

russell
russell

I think if I share the WSJ when logged in it removes the paywall if anyone wants to read the full article: https://www.wsj.com/articles/equifax-to-add-more-buy-now-pay-later-plans-to-credit-reports-11639915203?st=dis3sro4hn7ra9l&reflink=share_mobilewebshare

wilsonhammer
wilsonhammer

Thx

AM
AM

What gives these BNPL companies the right to share account information with Equifax? I wouldn’t think they’d have included that option in the T&C when people signed up.

AM
AM

Ugh.

Afterpay and Klarna already share account information. Zip doesn’t share information now but reserves the right to do so later.

Jason
Jason

why is this a bad thing?

if you’re young or lacking credit this becomes a low effort interest free way to start building credit, way easier than trying to get a credit card.

these apps usually start you with very low limits like $500 or so. hard to get in trouble unless you are really trying or maxing out limits across multiple lenders

ceejayoz
ceejayoz

It’s highly likely they included it in the T&C. A ding on your credit report is the primary threat they have to make you pay your payments. https://cdn.klarna.com/1.0/shared/content/legal/terms/0/en_us/sliceitinx says “We may report information about your account to credit bureaus. Late payments, missed payments, or other defaults on your account may be reflected in your credit bureau report”, for example.

Vic
Vic

Might be an easy way for complete beginner (without access to AU) to start a credit report.

Benji
Benji

Equifax can go suck on an egg

pizza
pizza
Vy
Vy

I am outraged that you are outraged.