Latest news with #buyNowPayLater
Yahoo
06-07-2025
- Business
- Yahoo
Buy now, pay later loans will now affect US credit scores – what does that mean for consumers?
A new change to buy now, pay later loans means borrowers' credit scores may see a change, which has worried some users of the loans. 'I have a feeling that I'm just not going to have as much access to spending power and zero or really low APR rates,' said Nicole Nitta, a 31-year-old Las Vegas resident, who uses BNPL and shared that she already does not have great credit. Fico, the credit scoring company used by most US lenders, announced on 23 June that they would include BNPL loans, which play 'an increasingly important role in consumers' financial lives', to help lenders more 'accurately evaluate credit readiness'. Related: 'How did I get approved for $30,000?': is buy now, pay later headed for a fall? For users of companies like Affirm, Afterpay and Klarna, the new calculation could benefit them because it allows them to build their credit – if, of course, they pay back the loans on time, experts say. Nitta first used BNPL for essentials in 2021, like non-perishable food items. She was out of work and 'basically living off of savings', she said. Now, working as an office manager for a private therapy practice and studying marriage and family therapy, Nitta is more stable financially but has significant student loan debt. She has since used BNPL for Christmas gifts and dishware when she moved into a new apartment, but said she always makes her payments on time. Ted Rossman, a senior industry analyst at the financial site Bankrate, says: 'if you're using buy now, pay later responsibly,' like Nitta, 'I would argue [the change] should help you as a steppingstone to improve your credit, and maybe it helps you get your first credit card or car loan. 'The main downside is if it dings you because you're paying late or racking up too much debt. I would say that's a fair consequence, because that is what happens on credit cards and other products,' he added. Companies like Affirm, Afterpay and Klarna were founded more than a decade ago, but their usage expanded significantly during the Covid-19 pandemic. These companies provided $180m in loans totaling more than $24bn in 2021, an almost tenfold increase from 2019, according to the Consumer Financial Protection Bureau. Fumiko Hayashi, a vice-president at the Federal Reserve Bank of Kansas City who conducts economic research on payments, noted that the change was due to a shift from purchasing in stores to buying online – in addition to an economic downturn during the pandemic. A typical BNPL loan allows consumers to divide a $50 to $1,000 purchase into four interest-free instalments. If a borrower does not make the required payments, then the lender charges them a late fee. Lenders also charge transaction fees to merchants. BNPL is most popular among people ages 33 and under, who represented 70% of borrowers of such loans in 2022, according to the financial protection bureau. Hayashi noted that a downside for the younger users is 'if they keep using BNPL only and they don't use a credit card at all, they cannot build credit history'. With Fico's change, using BNPL responsibly could be beneficial for some younger users with no previous credit history – but less so for those not as responsible. For most users, Fico and Affirm say, including BNPL data in credit reports produced higher scores or no score changes – a finding in a year-long report released in February that looked at 500,000 consumers. Still, there are people who could be hurt by Fico using BNPL data. People with sub-prime or deep sub-prime credit scores obtained more than 60% of new BNPL loans from 2021 to 2022, according to the financial protection bureau. And 24% of BNPL borrowers were late making a payment in 2024, a 6% increase from the prior year, according to the Federal Reserve. Among people who make $25,000 or less, the rate increased from 31% to 40%. Notably, BNPL access 'significantly reduces the sensitivity of spending relative to income', according to a Harvard Business School report. 'This effect is concentrated among individuals likely to be liquidity constrained, specifically, lower-income users and users without credit cards,' the report notes. Becca, a 26-year-old tech worker in New York who declined to use her last name, said she used BNPL for things like pricier beauty products – including a Chanel perfume. She said she might 'spend like 80 bucks this month on it and make two separate $40 payments, and then next month, I pay off the rest'. While the payment option has helped her, she is concerned about companies like DoorDash offering BNPL for minor purchases like a pizza delivery. 'It's just encouraging poor spending behavior from young people,' Becca said. 'All these items build up because you're using it again and again and again. You don't feel like you're spending a lot of money.' It may be some time before the economy feels the impact of the new credit score calculation, Rossman said. While Fico stated that it would make the new scores available in fall 2025, most lenders continue to use a credit score model from 2009, (despite Fico since releasing new versions). 'Change comes relatively slowly in the credit scoring world, so even if this becomes available in the fall, that doesn't mean everybody is going to be using it right away,' said Rossman. 'It's kind of like your phone. For instance, Apple has the iPhone 16, but a lot of people are still using the 15 or the 14 or even older models. Credit scoring works the same way.' Sign in to access your portfolio
The Guardian
05-07-2025
- Business
- The Guardian
Buy now, pay later loans will now affect US credit scores – what does that mean for consumers?
A new change to buy now, pay later loans means borrowers' credit scores may see a change, which has worried some users of the loans. 'I have a feeling that I'm just not going to have as much access to spending power and zero or really low APR rates,' said Nicole Nitta, a 31-year-old Las Vegas resident, who uses BNPL and shared that she already does not have great credit. Fico, the credit scoring company used by most US lenders, announced on 23 June that they would include BNPL loans, which play 'an increasingly important role in consumers' financial lives', to help lenders more 'accurately evaluate credit readiness'. For users of companies like Affirm, Afterpay and Klarna, the new calculation could benefit them because it allows them to build their credit – if, of course, they pay back the loans on time, experts say. Nitta first used BNPL for essentials in 2021, like non-perishable food items. She was out of work and 'basically living off of savings', she said. Now, working as an office manager for a private therapy practice and studying marriage and family therapy, Nitta is more stable financially but has significant student loan debt. She has since used BNPL for Christmas gifts and dishware when she moved into a new apartment, but said she always makes her payments on time. Ted Rossman, a senior industry analyst at the financial site Bankrate, says: 'if you're using buy now, pay later responsibly,' like Nitta, 'I would argue [the change] should help you as a steppingstone to improve your credit, and maybe it helps you get your first credit card or car loan. 'The main downside is if it dings you because you're paying late or racking up too much debt. I would say that's a fair consequence, because that is what happens on credit cards and other products,' he added. Companies like Affirm, Afterpay and Klarna were founded more than a decade ago, but their usage expanded significantly during the Covid-19 pandemic. These companies provided $180m in loans totaling more than $24bn in 2021, an almost tenfold increase from 2019, according to the Consumer Financial Protection Bureau. Fumiko Hayashi, a vice-president at the Federal Reserve Bank of Kansas City who conducts economic research on payments, noted that the change was due to a shift from purchasing in stores to buying online – in addition to an economic downturn during the pandemic. A typical BNPL loan allows consumers to divide a $50 to $1,000 purchase into four interest-free instalments. If a borrower does not make the required payments, then the lender charges them a late fee. Lenders also charge transaction fees to merchants. BNPL is most popular among people ages 33 and under, who represented 70% of borrowers of such loans in 2022, according to the financial protection bureau. Hayashi noted that a downside for the younger users is 'if they keep using BNPL only and they don't use a credit card at all, they cannot build credit history'. With Fico's change, using BNPL responsibly could be beneficial for some younger users with no previous credit history – but less so for those not as responsible. For most users, Fico and Affirm say, including BNPL data in credit reports produced higher scores or no score changes – a finding in a year-long report released in February that looked at 500,000 consumers. Still, there are people who could be hurt by Fico using BNPL data. People with sub-prime or deep sub-prime credit scores obtained more than 60% of new BNPL loans from 2021 to 2022, according to the financial protection bureau. And 24% of BNPL borrowers were late making a payment in 2024, a 6% increase from the prior year, according to the Federal Reserve. Among people who make $25,000 or less, the rate increased from 31% to 40%. Notably, BNPL access 'significantly reduces the sensitivity of spending relative to income', according to a Harvard Business School report. 'This effect is concentrated among individuals likely to be liquidity constrained, specifically, lower-income users and users without credit cards,' the report notes. Becca, a 26-year-old tech worker in New York who declined to use her last name, said she used BNPL for things like pricier beauty products – including a Chanel perfume. She said she might 'spend like 80 bucks this month on it and make two separate $40 payments, and then next month, I pay off the rest'. While the payment option has helped her, she is concerned about companies like DoorDash offering BNPL for minor purchases like a pizza delivery. 'It's just encouraging poor spending behavior from young people,' Becca said. 'All these items build up because you're using it again and again and again. You don't feel like you're spending a lot of money.' It may be some time before the economy feels the impact of the new credit score calculation, Rossman said. While Fico stated that it would make the new scores available in fall 2025, most lenders continue to use a credit score model from 2009, (despite Fico since releasing new versions). 'Change comes relatively slowly in the credit scoring world, so even if this becomes available in the fall, that doesn't mean everybody is going to be using it right away,' said Rossman. 'It's kind of like your phone. For instance, Apple has the iPhone 16, but a lot of people are still using the 15 or the 14 or even older models. Credit scoring works the same way.'
The Guardian
05-07-2025
- Business
- The Guardian
Buy now, pay later loans will now affect US credit scores – what does that mean for consumers?
A new change to buy now, pay later loans means borrowers' credit scores may see a change, which has worried some users of the loans. 'I have a feeling that I'm just not going to have as much access to spending power and zero or really low APR rates,' said Nicole Nitta, a 31-year-old Las Vegas resident, who uses BNPL and shared that she already does not have great credit. Fico, the credit scoring company used by most US lenders, announced on 23 June that they would include BNPL loans, which play 'an increasingly important role in consumers' financial lives', to help lenders more 'accurately evaluate credit readiness'. For users of companies like Affirm, Afterpay and Klarna, the new calculation could benefit them because it allows them to build their credit – if, of course, they pay back the loans on time, experts say. Nitta first used BNPL for essentials in 2021, like non-perishable food items. She was out of work and 'basically living off of savings', she said. Now, working as an office manager for a private therapy practice and studying marriage and family therapy, Nitta is more stable financially but has significant student loan debt. She has since used BNPL for Christmas gifts and dishware when she moved into a new apartment, but said she always makes her payments on time. Ted Rossman, a senior industry analyst at the financial site Bankrate, says: 'if you're using buy now, pay later responsibly,' like Nitta, 'I would argue [the change] should help you as a steppingstone to improve your credit, and maybe it helps you get your first credit card or car loan. 'The main downside is if it dings you because you're paying late or racking up too much debt. I would say that's a fair consequence, because that is what happens on credit cards and other products,' he added. Companies like Affirm, Afterpay and Klarna were founded more than a decade ago, but their usage expanded significantly during the Covid-19 pandemic. These companies provided $180m in loans totaling more than $24bn in 2021, an almost tenfold increase from 2019, according to the Consumer Financial Protection Bureau. Fumiko Hayashi, a vice-president at the Federal Reserve Bank of Kansas City who conducts economic research on payments, noted that the change was due to a shift from purchasing in stores to buying online – in addition to an economic downturn during the pandemic. A typical BNPL loan allows consumers to divide a $50 to $1,000 purchase into four interest-free instalments. If a borrower does not make the required payments, then the lender charges them a late fee. Lenders also charge transaction fees to merchants. BNPL is most popular among people ages 33 and under, who represented 70% of borrowers of such loans in 2022, according to the financial protection bureau. Hayashi noted that a downside for the younger users is 'if they keep using BNPL only and they don't use a credit card at all, they cannot build credit history'. With Fico's change, using BNPL responsibly could be beneficial for some younger users with no previous credit history – but less so for those not as responsible. For most users, Fico and Affirm say, including BNPL data in credit reports produced higher scores or no score changes – a finding in a year-long report released in February that looked at 500,000 consumers. Still, there are people who could be hurt by Fico using BNPL data. People with sub-prime or deep sub-prime credit scores obtained more than 60% of new BNPL loans from 2021 to 2022, according to the financial protection bureau. And 24% of BNPL borrowers were late making a payment in 2024, a 6% increase from the prior year, according to the Federal Reserve. Among people who make $25,000 or less, the rate increased from 31% to 40%. Notably, BNPL access 'significantly reduces the sensitivity of spending relative to income', according to a Harvard Business School report. 'This effect is concentrated among individuals likely to be liquidity constrained, specifically, lower-income users and users without credit cards,' the report notes. Becca, a 26-year-old tech worker in New York who declined to use her last name, said she used BNPL for things like pricier beauty products – including a Chanel perfume. She said she might 'spend like 80 bucks this month on it and make two separate $40 payments, and then next month, I pay off the rest'. While the payment option has helped her, she is concerned about companies like DoorDash offering BNPL for minor purchases like a pizza delivery. 'It's just encouraging poor spending behavior from young people,' Becca said. 'All these items build up because you're using it again and again and again. You don't feel like you're spending a lot of money.' It may be some time before the economy feels the impact of the new credit score calculation, Rossman said. While Fico stated that it would make the new scores available in fall 2025, most lenders continue to use a credit score model from 2009, (despite Fico since releasing new versions). 'Change comes relatively slowly in the credit scoring world, so even if this becomes available in the fall, that doesn't mean everybody is going to be using it right away,' said Rossman. 'It's kind of like your phone. For instance, Apple has the iPhone 16, but a lot of people are still using the 15 or the 14 or even older models. Credit scoring works the same way.'
CTV News
03-07-2025
- Business
- CTV News
Factoring in the hidden costs of buy now pay later
A Sezzle logo is shown in a person's online shopping cart on a laptop in Vernon, B.C. on Wednesday, November 18, 2020. THE CANADIAN PRESS/Jesse Johnston. TORONTO — When any service is offered for free, it's good to know why. In the booming market of buy now pay later financing, those opting in generally get to spread payments over a number of weeks at no cost, because it's the merchants that pay for the service in the hopes it will convince consumers to spend more. That's certainly the promise providers like Affirm and Klarna advertise to businesses, touting 20-something per cent boosts to order totals, while Shopify says its instalment program can lead to up to a 50 per cent boost in average order value, plus up to 28 per cent fewer abandoned carts. While the option can add convenience at possibly no direct cost to consumers, financial experts warn it's far from risk free. 'The temptation is very great to overspend,' said insolvency trustee Doug Hoyes. With the option popping up during online checkout, or being offered by a cashier, consumers are also not necessarily fully thinking through the decision, and the implications of what they're agreeing to, said Hoyes. 'For the vast majority of people, you are taking on debt without really realizing it. You're not making a conscious decision that yes, I will borrow that money. And that's dangerous, obviously.' While the vast majority of buyers pay off those debts — which tend to run in the hundreds of dollars rather than the thousands — there's also a rising push to have the data shared with credit-reporting agencies, creating new areas of risk. Just last week in the U.S., reporting giant FICO said it was launching its first credit scores that incorporate BNPL data. And in April, Affirm said it would start sharing data with TransUnion in the U.S., with a goal to do so in Canada as well, said spokesman Brian Levin. 'We believe that reporting to credit agencies supports responsible lending and promotes positive credit outcomes.' In Canada, Equifax said its credit reports have started to include data from some BNPL lenders, which may be used in the calculation of credit scores. TransUnion said it's still in the development stage of figuring out how to integrate BNPL data, including creating a separate section on credit reports to reflect the unique nature of these products, said spokeswoman Hyunjoo Kim. While work progresses to add BNPL to credit reporting, some providers have raised concerns. Klarna said in March last year that it wasn't sharing data with U.S. credit-reporting agencies because BNPL doesn't fit in well with other types of loans. The company, which confirmed it doesn't share data with Canadian agencies either, said adding BNPL to existing credit-reporting models could leave consumers worse off. 'As there is little clarity on the potential long-term impacts to the consumer, we believe this approach is too risky,' it said. Other providers, like AfterPay, also say they don't provide any data to credit-reporting agencies. Sezzle said sharing data with ratings agencies is an option for those who choose its Sezzle Up program to built their credit. The varying approaches on credit reporting are also a reminder of the variety of other subtle policy differences between providers that consumers should consider before signing up. Some, like Klarna, charge a small late fee and send unpaid debts to collection agencies, while others like Affirm and AfterPay lean more on halting any further purchases until older bills are paid. Most providers are also increasingly offering longer-term loans, with rates ranging anywhere from zero interest into the 30 per cent range. Some are also striking partnerships for bigger-ticket items like exercise equipment and flights, making for a potentially risky transition to higher debt loads. Just the fact that there are so many providers also raises the risk of stacking them, and having to keep track of multiple accounts of debt, said Natasha Macmillan, head of everyday banking. 'Because of the zero-interest appeal, it almost gives people a false sense of affordability,' she said. 'The real caution I would provide is ensuring that, if you do have one, or multiple, you're looking at the total cost of all of the Buy Now, Pay Later programs that you have ongoing, to ensure that you can actually cover the cost of each of them.' The strain of those cheap loans is starting to show for some providers. Klarna's most recent quarterly results showed a 17 per cent increase in consumer credit losses, and its overall losses doubled, raising concerns it could be the start of wider industry trouble. But the company's credit loss rate was still only 0.54 per cent, showing the vast majority of borrowers are still repaying their debts. The bigger question is whether consumers are spending more than they meant to, and if money they had planned to put elsewhere is now going toward paying back those purchases. To avoid a pile of unexpected bills, Hoyes said the key when shopping is to think ahead. 'There's nothing wrong with using a credit card or Buy Now, Pay Later or a car loan or a mortgage or anything like that. It's when you don't have a plan, when it becomes an impulse purchase when you're standing at the store, that's when you can get into a bit of trouble.' --- Ian Bickis, The Canadian Press This report by The Canadian Press was first published July 3, 2025.
Yahoo
30-06-2025
- Business
- Yahoo
Fintech Bolt progresses its turnaround by landing Klarna as a partner
Klarna and Bolt announced a partnership Monday, which will see Klarna's payment options integrated into Bolt's checkout operating system. This deal means Klarna will show up a buy-now-pay-later choice on Bolt devices. Merchants using Bolt can offer Klarna's Pay in 4 or monthly financing options to shoppers in physical stores, and shoppers can choose that option with a single click. The integration is set to go live later this year, first in the US and then in other markets around the world. In a statement given to TechCrunch, Ryan Breslow, co-founder and CEO of Bolt, told us that the partnership was 'so much bigger than two companies working together.' 'It's a clear sign that commerce is moving in an entirely new direction,' he said, adding that this will not be another buy-now-pay-later option but, rather, 'an entirely new model that offers best-in-class, flexible customer experience with no new contracts or technical lift required.' Klarna, which has been waiting in the wings to go public since the spring, describes the partnership as a means to drive long-term loyalty for itself and merchants. 'By embedding Klarna into thousands of Bolt merchants, we're scaling our U.S. footprint and making Klarna available everywhere consumers shop,' a Klarna spokesperson said. This latest partnership is a big deal for Bolt for other reasons. The fintech has struggled in recent years with legal challenges and upset investors. In March, Bolt founder Breslow returned as CEO after having stepped down in early 2022. In August, Bolt was reportedly attempting to raise $450 million at a potential $14 billion valuation, But it was an oddball deal with strange terms, including a 'cramdown' threat to existing shareholders There have been no updates on that apparent deal but Bloomberg reported earlier this month that Breslow was once again looking to raise. This time, he's looking for at least $600 million, half of which would go to Bolt, while the other half would go to his other startup, Love. Breslow has said that Bolt has at least three years of runway left. Earlier this month, Bolt also announced a partnership with Palantir to launch an AI-powered personalized checkout that remembers the shopping habits of consumers. It wants to expand this checkout across its merchants and within Bolt's new SuperApp, a 'one-click crypto and everyday payments' app, as he described to us in an April interview. Adding two big names as partners, Klarna and Palantir, is the kind of step that could help clean up Bolt's reputation as it seeks to raise again. Sign in to access your portfolio
