Latest news with #BuyNow
Time Magazine
8 hours ago
- Business
- Time Magazine
New Development Could Improve Small Business Owners' Credit
This article is published by a partner of TIME. By Levi King I've spent my life in the trenches of American small business—fixing signs in the Idaho cold, sweating payroll in manufacturing, and later, building fintech platforms to help entrepreneurs like me navigate the labyrinth of credit. So when I read the news that FICO is launching credit scores that finally incorporate Buy Now, Pay Later (BNPL) data, I felt a jolt of hope and a twinge of caution. This is a watershed moment for credit history in America, and it's going to ripple through every Main Street and startup hub in the country. What This Means for Small Business Owners' Personal Credit Let me break down what this means specifically for small business owners, why it matters for your personal credit, and what you should take away from this announcement. For years, BNPL has been the wild child of consumer finance—ubiquitous, easy to use, but invisible to the credit bureaus. That's always struck me as a disconnect, especially for small business owners who often rely on every available tool to manage cash flow. Millions of entrepreneurs have used BNPL to bridge gaps, buy inventory, or simply keep the lights on. Yet, until now, their responsible use (or misuse) of these products didn't show up on their personal credit reports. FICO's move to include BNPL data in their new Score 10 BNPL and Score 10 T BNPL models is a long-overdue correction. As someone who's seen firsthand how invisible credit behaviors can torpedo a business loan application, I can't overstate how important this is for small business owners' personal credit. Lenders will finally get a more complete, nuanced picture of your financial life—not just the traditional credit cards and loans, but also the BNPL plans you may rely on to run your business. One of my lifelong missions has been to expand access to capital for the underdog—the entrepreneur with grit but no generational wealth, the immigrant starting a food truck, the single mom launching an Etsy shop. Historically, if your first credit experience was with BNPL, you were invisible to lenders. Now, FICO's new models promise to help small business owners build a legitimate personal credit history from day one. This is more than a technical tweak; it's a step toward leveling the playing field. If you pay your BNPL bills on time, that positive behavior will finally count for something. For small business owners who bootstrap with every tool available, this could be the difference between a 'yes' and a 'no' from the bank. One of the biggest risks with adding BNPL to credit scores was always the potential for unfair penalties. If each BNPL plan was treated as a separate loan, someone using BNPL for multiple purchases could look overleveraged—even if they were managing it responsibly. FICO's solution? Aggregate the loans, so the model sees the big picture, not just the raw number of accounts. That's smart. It means the system recognizes patterns and context, not just raw data. I've seen too many business owners get dinged for technicalities or misunderstood behaviors. This approach is a win for fairness and accuracy, especially for entrepreneurs juggling multiple short-term obligations. There's always anxiety when a new scoring model rolls out. But FICO's research shows that for more than 85% of BNPL users, the impact on their credit score will be about 10 points—and for most, it will be positive or neutral. That's huge. It means responsible BNPL use can actually help your personal credit, not hurt it. For small business owners who rely on every point to qualify for loans or better rates, this matters. Of course, missed payments will hurt you. That's always been true, and it's a necessary guardrail. But the days of being penalized just for using BNPL are over. I've been on both sides of the lending desk. When lenders can't see the full scope of a borrower's obligations, they either overreact (decline or price too high) or underreact (approve risky loans). Both outcomes are bad for small businesses. Now, with BNPL data in the mix, lenders can make smarter, more informed decisions. That means more approvals for deserving borrowers and fewer surprises down the road. For business owners, this also means you can finally see how all your credit behaviors—traditional and BNPL—affect your personal score. Transparency is power. This change is a wake-up call for everyone, especially small business owners who often mix personal and business finances (sometimes out of necessity; sometimes out of confusion). If you use BNPL, those habits are now part of your personal credit story. It's time to get educated: understand your payment schedules, avoid overextending, and monitor your credit reports like a hawk. Knowledge is your first line of defense. If you're not sure how BNPL is showing up on your credit, ask. If you're using it to manage cash flow, make sure you're not setting yourself up for a surprise down the road. Here's the bottom line: this is an opportunity. If you're a small business owner who uses BNPL to buy inventory, manage expenses, or smooth out cash flow, you can now build personal credit with those transactions—if you do it wisely. Pay on time, don't overextend, and keep records. This could help you qualify for better financing, lower rates, and more favorable terms. But beware: BNPL is not free money. Overspending or missing payments will hurt your score and your business. The same discipline you bring to your business books, you should bring to your BNPL accounts. A Call for Business Credit Bureaus to Step Up I started my first business in a world where credit was a black box. I learned the hard way that what you don't know can kill your dreams. FICO's inclusion of BNPL data is a long-awaited leap toward a more accurate, inclusive, and transparent credit system, especially for small business owners' personal credit. But let's not stop here. I hope the business credit bureaus are paying attention and will follow FICO's lead by updating their scoring models to include SMB BNPL data as well. Small business owners deserve the same recognition for responsible borrowing on their business credit profiles as they are starting to get on their personal credit reports. This is how we build a stronger, fairer financial future for Main Street—together. About the Author: Levi King is CEO, co-founder, and chairman of A lifelong entrepreneur and small business advocate, Levi has dedicated over ten years of his professional career to increasing business credit transparency for small businesses. After starting and selling several successful companies, he founded Nav both to help small business owners build their credit health and to provide them with powerful tools to make their financing dreams a reality.
2 days ago
- Business
Buy Now, Pay Later loans will soon affect some credit scores
NEW YORK -- Hundreds of millions of 'Buy Now, Pay Later' loans will soon affect credit scores for millions of Americans who use the loans to buy clothing, furniture, concert tickets, and takeout. Scoring company FICO said Monday that it is rolling out a new model that factors the short-term loans into their consumer scores. A majority of lenders use FICO scores to determine a borrower's credit worthiness. Previously, the loans had been excluded, though Buy Now, Pay Later company Affirm began voluntarily reporting pay-in-four loans to Experian, a separate credit bureau, in April. The new FICO scores will be available beginning in the fall, as an option for lenders to increase visibility into consumers' repayment behavior, the company said. Still, not all Buy Now, Pay Later companies share their data with the credit bureaus, and not all lenders will opt in to using the new models, so widespread adoption could take time, according to Adam Rust, director of financial services at the nonprofit Consumer Federation of America. Here's what to know. 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. The loans are marketed as zero-interest, and most require no credit check or only a soft credit check. The main three credit reporting bureaus, Experian, TransUnion, and Equifax, haven't yet incorporated a standard way of including these new financial products in their reports, since they don't adhere to existing models of lending and repayment. FICO, the score of the Fair Isaac Corporation, uses data from the bureaus to calculate its own credit score, and is independently choosing to pilot a new score that takes the loans into account. BNPL providers promote the plans as safer alternatives to credit cards, while consumer advocates warn about 'loan stacking,' in which consumers take on many loans at once across several companies. So far, there's been little visibility into this practice in the industry, and the opacity has led to warnings of 'phantom debt" that could mask the health of the consumer. In a statement, FICO said that their new credit score model is accounting for the growing significance of the loans in the U.S. credit ecosystem. 'Buy Now, Pay Later loans are playing an increasingly important role in consumers' financial lives,' said Julie May, vice president and general manager of business-to-business scores at FICO. 'We're enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products." FICO said the new model will responsibly expand access to credit. Many users of BNPL loans are younger consumers and consumers who may not have good or lengthy credit histories. In a joint study with Affirm, FICO trained its new scores on a sample of more than 500,000 BNPL borrowers and found that consumers with five or more loans typically saw their scores increase or remain stable under the new model. For consumers who pay back their BNPL loans in a timely way, the new credit scoring model could help them improve their credit scores, increasing access to mortgages, car loans, and apartment rentals. Currently, the loans don't typically contribute directly to improved scores, though missed payments can hurt or ding a score. Since March, credit scores have declined steeply for millions, as student loan payments resume and many student borrowers find themselves unable to make regular payments on their federal student loans. Nadine Chabrier, senior policy and litigation counsel at the Center for Responsible Lending, said her main concern is that the integration of the loans into a score could have unexpected negative effects on people who are already credit-restrained. 'There isn't a lot of information out there about how integrating BNPL into credit scoring will work out,' Chabrier said. 'FICO simulated the effect on credit scoring through a study. They saw that some users' scores increased. But if you factor in something that, last week, didn't affect your credit, and this week, it does, without having very much information about the modeling, it's a little hard to tell what the consequences will be.' Chabrier cited research that's shown that many BNPL users have revolving credit card balances, lower credit scores, delinquencies, and existing debt. Women of color are also more likely to use the loans, she said. 'This is a credit vulnerable community,' said Chabrier. Rust, of the Consumer Federation of America, said he doesn't expect this to be a game-changer for consumers who already have a credit profile. 'Are we at a point where using BNPL loans will dramatically alter your credit profile? Probably not,' he said. 'I think it's important that people have reasonable expectations.' Rust said the average BNPL loan is for $135, and that repaying such small loans, even consistently, might not result in changes to a credit score that would significantly move the needle. 'It's not about going from 620 to 624. It's about going from 620 to 780,' he said, referring to the kind of credit score jumps that affect one's credit card offers, interest rates on loans, and the like. Still, Rust said that increased transparency around the loans could create a more accurate picture of a consumer's debts, which could improve accurate underwriting and keep consumers from over-extending themselves. 'This addresses the problem of 'phantom debt,' and that's a good thing,' he said. 'Because it could be something that keeps people from getting too deeply into debt they can't afford.' The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
The Hill
2 days ago
- Business
- The Hill
Buy Now, Pay Later loans will soon affect some credit scores
NEW YORK (AP) — Hundreds of millions of 'Buy Now, Pay Later' loans will soon affect credit scores for millions of Americans who use the loans to buy clothing, furniture, concert tickets, and takeout. Scoring company FICO said Monday that it is rolling out a new model that factors the short-term loans into their consumer scores. A majority of lenders use FICO scores to determine a borrower's credit worthiness. Previously, the loans had been excluded, though Buy Now, Pay Later company Affirm began voluntarily reporting pay-in-four loans to Experian, a separate credit bureau, in April. The new FICO scores will be available beginning in the fall, as an option for lenders to increase visibility into consumers' repayment behavior, the company said. Still, not all Buy Now, Pay Later companies share their data with the credit bureaus, and not all lenders will opt in to using the new models, so widespread adoption could take time, according to Adam Rust, director of financial services at the nonprofit Consumer Federation of America. Here's what to know. 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. The loans are marketed as zero-interest, and most require no credit check or only a soft credit check. The main three credit reporting bureaus, Experian, TransUnion, and Equifax, haven't yet incorporated a standard way of including these new financial products in their reports, since they don't adhere to existing models of lending and repayment. FICO, the score of the Fair Isaac Corporation, uses data from the bureaus to calculate its own credit score, and is independently choosing to pilot a new score that takes the loans into account. BNPL providers promote the plans as safer alternatives to credit cards, while consumer advocates warn about 'loan stacking,' in which consumers take on many loans at once across several companies. So far, there's been little visibility into this practice in the industry, and the opacity has led to warnings of 'phantom debt' that could mask the health of the consumer. In a statement, FICO said that their new credit score model is accounting for the growing significance of the loans in the U.S. credit ecosystem. 'Buy Now, Pay Later loans are playing an increasingly important role in consumers' financial lives,' said Julie May, vice president and general manager of business-to-business scores at FICO. 'We're enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products.' FICO said the new model will responsibly expand access to credit. Many users of BNPL loans are younger consumers and consumers who may not have good or lengthy credit histories. In a joint study with Affirm, FICO trained its new scores on a sample of more than 500,000 BNPL borrowers and found that consumers with five or more loans typically saw their scores increase or remain stable under the new model. For consumers who pay back their BNPL loans in a timely way, the new credit scoring model could help them improve their credit scores, increasing access to mortgages, car loans, and apartment rentals. Currently, the loans don't typically contribute directly to improved scores, though missed payments can hurt or ding a score. Since March, credit scores have declined steeply for millions, as student loan payments resume and many student borrowers find themselves unable to make regular payments on their federal student loans. Nadine Chabrier, senior policy and litigation counsel at the Center for Responsible Lending, said her main concern is that the integration of the loans into a score could have unexpected negative effects on people who are already credit-restrained. 'There isn't a lot of information out there about how integrating BNPL into credit scoring will work out,' Chabrier said. 'FICO simulated the effect on credit scoring through a study. They saw that some users' scores increased. But if you factor in something that, last week, didn't affect your credit, and this week, it does, without having very much information about the modeling, it's a little hard to tell what the consequences will be.' Chabrier cited research that's shown that many BNPL users have revolving credit card balances, lower credit scores, delinquencies, and existing debt. Women of color are also more likely to use the loans, she said. 'This is a credit vulnerable community,' said Chabrier. Rust, of the Consumer Federation of America, said he doesn't expect this to be a game-changer for consumers who already have a credit profile. 'Are we at a point where using BNPL loans will dramatically alter your credit profile? Probably not,' he said. 'I think it's important that people have reasonable expectations.' Rust said the average BNPL loan is for $135, and that repaying such small loans, even consistently, might not result in changes to a credit score that would significantly move the needle. 'It's not about going from 620 to 624. It's about going from 620 to 780,' he said, referring to the kind of credit score jumps that affect one's credit card offers, interest rates on loans, and the like. Still, Rust said that increased transparency around the loans could create a more accurate picture of a consumer's debts, which could improve accurate underwriting and keep consumers from over-extending themselves. 'This addresses the problem of 'phantom debt,' and that's a good thing,' he said. 'Because it could be something that keeps people from getting too deeply into debt they can't afford.' ___ The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
Hamilton Spectator
2 days ago
- Business
- Hamilton Spectator
Buy Now, Pay Later loans will soon affect some credit scores
NEW YORK (AP) — Hundreds of millions of 'Buy Now, Pay Later' loans will soon affect credit scores for millions of Americans who use the loans to buy clothing, furniture, concert tickets, and takeout. Scoring company FICO said Monday that it is rolling out a new model that factors the short-term loans into their consumer scores. A majority of lenders use FICO scores to determine a borrower's credit worthiness. Previously, the loans had been excluded, though Buy Now, Pay Later company Affirm began voluntarily reporting pay-in-four loans to Experian, a separate credit bureau, in April. The new FICO scores will be available beginning in the fall, as an option for lenders to increase visibility into consumers' repayment behavior, the company said. Still, not all Buy Now, Pay Later companies share their data with the credit bureaus, and not all lenders will opt in to using the new models, so widespread adoption could take time, according to Adam Rust, director of financial services at the nonprofit Consumer Federation of America. Here's what to know. Why haven't the loans appeared in credit scores previously? 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. The loans are marketed as zero-interest, and most require no credit check or only a soft credit check. The main three credit reporting bureaus, Experian, TransUnion, and Equifax, haven't yet incorporated a standard way of including these new financial products in their reports, since they don't adhere to existing models of lending and repayment. FICO, the score of the Fair Isaac Corporation, uses data from the bureaus to calculate its own credit score, and is independently choosing to pilot a new score that takes the loans into account. Why is this important? BNPL providers promote the plans as safer alternatives to credit cards, while consumer advocates warn about 'loan stacking,' in which consumers take on many loans at once across several companies. So far, there's been little visibility into this practice in the industry, and the opacity has led to warnings of 'phantom debt' that could mask the health of the consumer . In a statement, FICO said that their new credit score model is accounting for the growing significance of the loans in the U.S. credit ecosystem. 'Buy Now, Pay Later loans are playing an increasingly important role in consumers' financial lives,' said Julie May, vice president and general manager of business-to-business scores at FICO. 'We're enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products.' What does FICO hope to achieve? FICO said the new model will responsibly expand access to credit. Many users of BNPL loans are younger consumers and consumers who may not have good or lengthy credit histories. In a joint study with Affirm, FICO trained its new scores on a sample of more than 500,000 BNPL borrowers and found that consumers with five or more loans typically saw their scores increase or remain stable under the new model. For consumers who pay back their BNPL loans in a timely way, the new credit scoring model could help them improve their credit scores, increasing access to mortgages, car loans, and apartment rentals. Currently, the loans don't typically contribute directly to improved scores, though missed payments can hurt or ding a score. Since March, credit scores have declined steeply for millions , as student loan payments resume and many student borrowers find themselves unable to make regular payments on their federal student loans. What are the risks and concerns? Nadine Chabrier, senior policy and litigation counsel at the Center for Responsible Lending, said her main concern is that the integration of the loans into a score could have unexpected negative effects on people who are already credit-restrained. 'There isn't a lot of information out there about how integrating BNPL into credit scoring will work out,' Chabrier said. 'FICO simulated the effect on credit scoring through a study. They saw that some users' scores increased. But if you factor in something that, last week, didn't affect your credit, and this week, it does, without having very much information about the modeling, it's a little hard to tell what the consequences will be.' Chabrier cited research that's shown that many BNPL users have revolving credit card balances, lower credit scores, delinquencies, and existing debt. Women of color are also more likely to use the loans, she said. 'This is a credit vulnerable community,' said Chabrier. Will consumers see immediate effects? Rust, of the Consumer Federation of America, said he doesn't expect this to be a game-changer for consumers who already have a credit profile. 'Are we at a point where using BNPL loans will dramatically alter your credit profile? Probably not,' he said. 'I think it's important that people have reasonable expectations.' Rust said the average BNPL loan is for $135, and that repaying such small loans, even consistently, might not result in changes to a credit score that would significantly move the needle. 'It's not about going from 620 to 624. It's about going from 620 to 780,' he said, referring to the kind of credit score jumps that affect one's credit card offers, interest rates on loans, and the like. Still, Rust said that increased transparency around the loans could create a more accurate picture of a consumer's debts, which could improve accurate underwriting and keep consumers from over-extending themselves. 'This addresses the problem of 'phantom debt,' and that's a good thing,' he said. 'Because it could be something that keeps people from getting too deeply into debt they can't afford.' ___ The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
Winnipeg Free Press
2 days ago
- Business
- Winnipeg Free Press
Buy Now, Pay Later loans will soon affect some credit scores
NEW YORK (AP) — Hundreds of millions of 'Buy Now, Pay Later' loans will soon affect credit scores for millions of Americans who use the loans to buy clothing, furniture, concert tickets, and takeout. Scoring company FICO said Monday that it is rolling out a new model that factors the short-term loans into their consumer scores. A majority of lenders use FICO scores to determine a borrower's credit worthiness. Previously, the loans had been excluded, though Buy Now, Pay Later company Affirm began voluntarily reporting pay-in-four loans to Experian, a separate credit bureau, in April. The new FICO scores will be available beginning in the fall, as an option for lenders to increase visibility into consumers' repayment behavior, the company said. Still, not all Buy Now, Pay Later companies share their data with the credit bureaus, and not all lenders will opt in to using the new models, so widespread adoption could take time, according to Adam Rust, director of financial services at the nonprofit Consumer Federation of America. Here's what to know. Why haven't the loans appeared in credit scores previously? 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. The loans are marketed as zero-interest, and most require no credit check or only a soft credit check. The main three credit reporting bureaus, Experian, TransUnion, and Equifax, haven't yet incorporated a standard way of including these new financial products in their reports, since they don't adhere to existing models of lending and repayment. FICO, the score of the Fair Isaac Corporation, uses data from the bureaus to calculate its own credit score, and is independently choosing to pilot a new score that takes the loans into account. Why is this important? BNPL providers promote the plans as safer alternatives to credit cards, while consumer advocates warn about 'loan stacking,' in which consumers take on many loans at once across several companies. So far, there's been little visibility into this practice in the industry, and the opacity has led to warnings of 'phantom debt' that could mask the health of the consumer. In a statement, FICO said that their new credit score model is accounting for the growing significance of the loans in the U.S. credit ecosystem. 'Buy Now, Pay Later loans are playing an increasingly important role in consumers' financial lives,' said Julie May, vice president and general manager of business-to-business scores at FICO. 'We're enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products.' What does FICO hope to achieve? FICO said the new model will responsibly expand access to credit. Many users of BNPL loans are younger consumers and consumers who may not have good or lengthy credit histories. In a joint study with Affirm, FICO trained its new scores on a sample of more than 500,000 BNPL borrowers and found that consumers with five or more loans typically saw their scores increase or remain stable under the new model. For consumers who pay back their BNPL loans in a timely way, the new credit scoring model could help them improve their credit scores, increasing access to mortgages, car loans, and apartment rentals. Currently, the loans don't typically contribute directly to improved scores, though missed payments can hurt or ding a score. Since March, credit scores have declined steeply for millions, as student loan payments resume and many student borrowers find themselves unable to make regular payments on their federal student loans. What are the risks and concerns? Nadine Chabrier, senior policy and litigation counsel at the Center for Responsible Lending, said her main concern is that the integration of the loans into a score could have unexpected negative effects on people who are already credit-restrained. 'There isn't a lot of information out there about how integrating BNPL into credit scoring will work out,' Chabrier said. 'FICO simulated the effect on credit scoring through a study. They saw that some users' scores increased. But if you factor in something that, last week, didn't affect your credit, and this week, it does, without having very much information about the modeling, it's a little hard to tell what the consequences will be.' Chabrier cited research that's shown that many BNPL users have revolving credit card balances, lower credit scores, delinquencies, and existing debt. Women of color are also more likely to use the loans, she said. 'This is a credit vulnerable community,' said Chabrier. Will consumers see immediate effects? Rust, of the Consumer Federation of America, said he doesn't expect this to be a game-changer for consumers who already have a credit profile. 'Are we at a point where using BNPL loans will dramatically alter your credit profile? Probably not,' he said. 'I think it's important that people have reasonable expectations.' Rust said the average BNPL loan is for $135, and that repaying such small loans, even consistently, might not result in changes to a credit score that would significantly move the needle. 'It's not about going from 620 to 624. It's about going from 620 to 780,' he said, referring to the kind of credit score jumps that affect one's credit card offers, interest rates on loans, and the like. Still, Rust said that increased transparency around the loans could create a more accurate picture of a consumer's debts, which could improve accurate underwriting and keep consumers from over-extending themselves. 'This addresses the problem of 'phantom debt,' and that's a good thing,' he said. 'Because it could be something that keeps people from getting too deeply into debt they can't afford.' ___ The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
