Credit Sesame explains how the new FICO credit score incorporates Buy Now Pay Later (BNPL) activity, which may impact how consumers build and maintain their credit.
FICO, the company behind the widely used FICO credit scores, announced it will launch a new version that includes BNPL activity. This update could help people who struggle to qualify for traditional credit start building a record, but it may also carry risks.
New FICO score to include BNPL transactions
FICO issues a variety of credit scores for different purposes. For the first time, some versions will include BNPL transactions. FICO expects to launch these versions in the fall of 2025.
This is significant for a growing number of consumers. The Consumer Financial Protection Bureau (CFPB) found that in 2019, there were about 100,000 BNPL applications per day. By 2022, this number had soared to over 1 million per day.
The CFPB also reported that 79 percent of BNPL applications were approved. Approximately 45 percent of BNPL borrowers had deep subprime credit scores, and an additional 16 percent had subprime scores.
For people who have had trouble qualifying for other types of credit, including BNPL in their credit records may help them get started. Using BNPL to build a good credit score could eventually help them qualify for more traditional forms of credit.
Limitations of the new score
While the new FICO scores offer hope to people who have been excluded from the credit system, they are not a universal solution.
There are many different types of credit scores used for other purposes. A BNPL lender may want a score that includes BNPL history, but it might be less relevant to a mortgage lender or a credit card company.
Whether BNPL history is included depends on whether the BNPL lender reports transactions to the credit bureaus (Equifax, Experian, and TransUnion).
If BNPL history is reported, the impact on your credit score depends on whether it shows you have used BNPL loans responsibly.
Will the new FICO score help or hurt you?
The new scores were developed with input from several large lenders, who have a vested interest in identifying potential risk. If your BNPL history suggests risk, having it included could hurt rather than help your score.
You might see your score decline if:
- BNPL leads you to carry higher credit balances than you otherwise would.
- You frequently have late payments on your BNPL loans.
BNPL can be an opportunity, but success depends on how you use it. It may help you build a credit record, but making it a good record depends on your payment habits.
Other ways to build credit
The inclusion of BNPL in credit scores is not the only way to build a positive credit record. You might also consider:
- Signing up with Credit Sesame to see your Sesame Grade. This evaluates your credit profile and offers personalized suggestions to help improve the factors that may be affecting your score.
- Becoming an authorized user on someone else’s credit card. This allows your usage of that card to appear in your credit history, which can help even if you cannot yet qualify for your own card.
- Trying Credit Sesame’s Credit Builder. This works like a debit card, but it helps establish a credit payment history.
- Using a secured credit card. These require a deposit, but they can be easier to qualify for than traditional credit cards. Over time, responsible use may help you move to an unsecured card.
Other options, such as reporting rent payments, continue to make credit more inclusive. While the new FICO scores add another tool, building and maintaining good credit still depends on using each opportunity carefully and responsibly.
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Disclaimer: The article and information provided here are for informational purposes only and are not intended as a substitute for professional advice.
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