5 Key Takeaways: FICO Score To Include Buy Now, Pay Later Data

"The article discusses the integration of Buy Now, Pay Later (BNPL) services into FICO credit scores and its potential impact on mortgage lending. While BNPL loans have been popular due to their interest-free nature, their incorporation into credit scores could change how lenders assess borrowers in the future. Despite this shift, immediate effects on mortgage lending are unlikely, as the industry typically relies on older scoring models."

"Late payments on BNPL loans can now negatively affect credit scores, highlighting the importance of responsible usage for potential homebuyers. Aspiring homebuyers should prioritize traditional credit-building practices like timely payments and low credit card utilization over relying solely on BNPL services for mortgage readiness. In conclusion, while BNPL services are becoming part of the credit conversation, focusing on established credit-building strategies remains crucial for individuals planning to purchase a home in the near future."

"BNPL services will now be included in FICO credit scores, offering lenders a more complete assessment of borrowers' financial habits. Mortgage lenders are not likely to immediately incorporate BNPL data into their decisions due to the slow and regulated process of upgrading scoring systems. Early estimates suggest that the impact on FICO scores from including BNPL data will be minimal for the majority of users. Late payments on BNPL loans can now negatively affect credit scores, highlighting the importance of responsible usage for potential homebuyers."

FICO has started incorporating Buy Now, Pay Later (BNPL) transactions into its credit scoring models to better reflect consumers' payment behavior. BNPL usage grew because many plans were interest-free, but now on-time reporting can bolster credit assessments while delinquencies can harm scores. Mortgage lenders currently rely on older scoring models, so widespread effects on mortgage underwriting will be gradual and limited in the near term. Early testing indicates most BNPL users will see minimal score changes. Prospective homebuyers should continue emphasizing timely payments, low credit card utilization, and other traditional credit-building practices rather than relying solely on BNPL.

Read at SFGATE