In a world where impulse meets installment, the quiet revolution of Buy Now, Pay Later (BNPL) has reshaped how people spend—and how debt silently accumulates. For years, the purchase of a $600 Labubu collectible, a limited-edition sneaker, or a last-minute vacation could be split into four payments with no immediate effect on your credit score. But beginning this fall, that anonymity ends.

FICO, the financial behemoth that decides your creditworthiness with a three-digit number, has announced that it will begin incorporating BNPL borrowing into its credit scoring formula. It’s a seismic shift in how consumer behavior—especially among younger generations—is tracked and evaluated in the broader financial ecosystem. Some see it as a necessary update to a long-overdue blind spot. Others worry it will unearth phantom debt that consumers had assumed was invisible.

From Convenience to Credit Record

For years, BNPL operated in a regulatory grey zone. Offered by companies like Affirm, Klarna, Afterpay, and Zip, these short-term installment loans allowed shoppers to break purchases into smaller chunks—typically four payments over six weeks—without interest, assuming they paid on time. Unlike credit cards, BNPL did not require a hard credit check, and crucially, BNPL borrowing was not reported to credit bureaus.

That is changing.

FICO’s move, following Affirm’s decision to report BNPL activity to Experian and TransUnion, marks the formal entrance of installment-based micro-loans into the credit mainstream. The integration will begin this fall with FICO’s newest credit scoring models, bringing long-term consequences for both responsible and delinquent borrowers.

A Mixed Blessing for Borrowers

On one hand, this move could be beneficial for many, especially younger shoppers who lack extensive credit histories. A 23-year-old student who has never had a credit card but regularly and responsibly uses BNPL could see their credit score rise, as FICO now recognizes those repayments as evidence of financial responsibility.

On the other hand, those who frequently miss payments or have overextended themselves across multiple BNPL platforms might experience a rude awakening. What once existed outside the formal economy now becomes visible—and potentially penalizing.

FICO itself has acknowledged this duality:

• Positive impact: Borrowers with limited or thin credit files who have consistently paid BNPL loans on time may see improved credit scores.

• Negative impact: Borrowers with missed BNPL payments could see their credit scores drop, affecting their ability to secure traditional loans, mortgages, or even employment in some industries.

Why This Matters Now

BNPL usage has exploded in recent years, driven by e-commerce, economic anxiety, and the allure of low-commitment credit. According to eMarketer, Americans are projected to borrow $108 billion via BNPL in 2025, up from $94 billion in 2024. Much of this growth has come from younger users, particularly Gen Z and Millennials, who often use BNPL for clothing, tech gadgets, travel, or collectible culture—products that were once paid for outright or left behind in the cart.

The appeal of BNPL lies in its frictionless experience: no hard credit checks, no revolving interest, no delay between impulse and gratification. But it’s precisely this ease that has spurred concern among financial watchdogs.

The Phantom Debt Problem

Before this change, BNPL loans were virtually invisible to most credit scoring systems. A borrower could have open balances across four BNPL platforms—multiple installment plans in various states of repayment—and none of it would show up on a traditional credit report. Lenders evaluating such a borrower for a car loan or mortgage had no way of knowing their true financial exposure.

This phenomenon, sometimes dubbed phantom debt, masked growing liabilities from institutions tasked with managing risk. And for borrowers, it created a false sense of affordability. Missing a payment might incur a late fee or pause your ability to use that BNPL service again—but it wouldn’t affect your future access to mainstream credit.

Now that dynamic is changing. FICO’s update aims to close this data gap and offer lenders a more holistic view of borrower behavior.

The Data Dilemma

Despite the shift, it may take years before BNPL data is fully integrated across the financial industry. For now, FICO will incorporate this information into its two newest credit models, FICO 10 and FICO 10T. These models include trended data, which tracks not just payment history but also patterns over time, such as whether a borrower’s debt is increasing or decreasing month over month.

But there’s a catch: most lenders still use older FICO models, such as FICO 8, developed in 2009. Adoption of the newer models has been slow, in part because they require more granular and dynamic data that many institutions aren’t equipped to process at scale.

In other words, even as FICO updates its formula, it will be years before BNPL usage consistently influences mainstream lending decisions. But the infrastructure is now in place—and it is moving.

Default Rates Are Rising

Critics of BNPL often point to rising default rates as a red flag. While default percentages are still relatively low, the trend is moving in the wrong direction. For instance, Klarna recently reported that its default losses rose from 0.51% to 0.54% as a share of total lending. While seemingly small, these shifts signal growing borrower strain.

As economic uncertainty lingers—marked by inflation, housing stress, and wage stagnation—BNPL becomes a tempting but risky bridge. What starts as a manageable payment plan can quickly spiral into overlapping debt, especially when users juggle multiple platforms without centralized oversight.

The inclusion of BNPL in FICO scoring could curb this behavior by increasing the stakes of default. Borrowers may think twice before opening their fifth installment plan if they know it might impact their future ability to rent an apartment or secure a loan.

Cultural Shifts: Spending in the Age of Scoring

The BNPL boom speaks to broader cultural and generational shifts. Millennials and Gen Z are navigating adulthood in a digital financial ecosystem radically different from their parents’ world. They often distrust credit cards—associating them with revolving debt—and embrace fintech platforms that emphasize transparency, control, and user experience.

But as BNPL becomes normalized, the line between convenience and consequence blurs. A Labubu collectible or fashion drop might seem trivial at the point of purchase. But multiply that behavior across a few platforms and missed payments, and the impact can cascade.

This is not just a financial issue, but a cultural one—where lifestyle purchases, social media-fueled trends, and creditworthiness now intersect in new and precarious ways.

BNPL Lenders Under Pressure

BNPL providers themselves face mounting pressure to standardize reporting practices. Affirm has taken the lead in reporting to major credit bureaus. Others, like Klarna and Afterpay, are likely to follow, though with differing strategies on what gets reported—active accounts, closed accounts, missed payments, or all of the above.

Regulators, too, are paying attention. The Consumer Financial Protection Bureau (CFPB) has signaled interest in greater oversight, citing concerns about data privacy, transparency, and consumer understanding. As BNPL blends further into mainstream credit reporting, expect regulatory scrutiny to intensify.

Looking Ahead: What Consumers Should Know

For consumers, the message is clear: BNPL is no longer off the record.

Those who use these services regularly should begin treating them with the same seriousness they would a credit card or auto loan. Here are a few takeaways:

1. Pay on time, every time. Even a single missed payment could now affect your credit score.

2. Track your BNPL accounts. If you’re using multiple services, keep a log of repayment schedules and amounts.

3. Review your credit reports. Check with Experian, TransUnion, or Equifax to see if BNPL activity appears, and dispute inaccuracies promptly.

4. Be strategic. If building credit is your goal, responsible BNPL use might help. But if you’re already financially stretched, avoid using these services as a substitute for income.

FICO’s decision to incorporate BNPL borrowing into credit scores is a long-overdue modernization of financial reality. It acknowledges that a significant portion of consumer debt has been hiding in plain sight and aims to bring transparency to a system built on visibility and trust.

But transparency cuts both ways. For some, it offers a chance to build credit through responsible use. For others, it introduces a new source of risk—one that turns short-term spending into long-term scoring consequences.

As the $600 Labubu purchase joins the mortgage application, the student loan, and the utility bill in shaping financial identity, consumers face a new imperative: spend with awareness, and borrow with foresight.

Because now, Buy Now, Pay Later also means Buy Now, Be Judged Later

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