Last week the news broke that the big three credit agencies — Equifax, Experian, and TransUnion — will begin to monitor Buy Now, Pay Later (BNPL) behavior. In other words, they made our article about BNPL half-obsolete.

So what is the new arrangement? That depends…

  • The agencies can’t agree on whether BNPL is an installment loan or a line of credit.
  • Will BNPL behavior become part of traditional credit, or is it a standalone product? 
  • The type of credit BNPL falls under is also up for debate. The two competing options are 1) making BNPL part of regular credit, or 2) making it an opt-in service for lenders. 
  • The average interest rate for a BNPL is 16%, with a range as high as 22% and as low as 0% — depending on credit score.
  • BNPL programs are essentially lines of credit that get used to full capacity immediately. Some people are worried that will reflect negatively on their credit utilization score. One proposed solution to this would be to count BNPL loans as revolving credit — or, this may be a good reason not to make BNPL part of traditional credit. The jury is still out on what each agency will choose.
  • BNPL is part of a new community of alternative credit reporting. Things like successful debits for streaming services and electronic proof of rent payments are now being considered by some lenders to evaluate a person’s credit.

It seems like the only way to know what interest rate you would get with a BNPL is to apply for one. That’s OK, because BNPL credit checks use only soft inquiries. As usual I would suggest a healthy bit of cynicism going into a BNPL contract, and really crunch the numbers. If you’re having trouble with that, contact us to learn how we can help.