FICO announced a new scoring model that will include short-term loans like those from Buy Now, Pay Later (BNPL) services in consumer credit scores starting this fall. Historically, such loans were excluded from FICO scores, which many lenders rely on to assess creditworthiness. The move aims to grant lenders better insights into consumer repayment behaviors. However, not all BNPL providers share data with credit bureaus, and many lenders may not adopt the new model, potentially delaying widespread changes in credit reporting practices.
Typically, when using Buy Now, Pay Later loans, consumers pay for a given purchase in four installments over six weeks, in a model more similar to layaway than to a traditional credit card.
FICO's move to factor in these short-term loans into their consumer scores aims to increase visibility into consumers' repayment behavior, highlighting changing standards in credit reporting.
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