Buy Now, Pay Later: What You Need to Know About Credit and Financial Consequences

The next time you check out online and choose the "Buy Now, Pay Later" (BNPL) option for a new pair of shoes or makeup, you might be doing more than just stretching your payments, you could be impacting your credit report.

Affirm, one of the largest BNPL lenders, recently announced it will begin reporting all new loans to Experian, one of the three major credit bureaus. This change brings BNPL loans closer to traditional credit products like car loans and mortgages when it comes to your credit history, and other lenders and bureaus are expected to follow.

Here’s what you need to know about the evolving world of BNPL loans and how they could affect your financial future.

The Changing Landscape of Buy Now, Pay Later

Until now, BNPL loans—especially the common “pay in four” short-term, interest-free options—haven’t typically appeared on credit reports. Affirm’s new policy changes that: going forward, every Affirm loan you take out will be reflected on your Experian credit file, whether you pay on time or miss a payment.

While the impact on credit scores may not be immediate, as traditional scoring models haven’t fully adapted to account for BNPL yet, updates are on the horizon. Experian noted that future models may incorporate this data more directly. A joint study from FICO and Affirm in February found that for most users (85%), the addition of BNPL loans resulted in credit score changes of fewer than 10 points.

Meanwhile, TransUnion is also working to integrate BNPL data into its reporting systems, suggesting this trend is only gaining momentum.

Why This Matters: A Blind Spot Gets Filled

BNPL loans exploded in popularity during the pandemic, as retailers raced to offer flexible checkout options. In 2022 alone, Americans opened over 277 million BNPL loans totaling $34 billion, a steep jump from the previous year.

Until recently, however, these loans represented a blind spot in the credit system. Most lenders couldn't see them when evaluating a borrower's overall debt load. This limited visibility posed risks, particularly around “loan stacking,” where consumers juggle multiple BNPL loans across different providers. In fact, in 2022, 63% of BNPL users had more than one loan at a time, and 33% had loans from multiple companies.

The shift toward reporting BNPL loans aims to give lenders a clearer picture of an individual’s financial obligations and help consumers manage their borrowing more responsibly.

What This Means for You

If you regularly use BNPL options to manage your budget or spread out purchases, you need to be aware that these transactions could now follow you in your financial record.

Positive Impact: If you make your payments on time, reporting BNPL loans could help build your credit profile, especially if you’re newer to borrowing.
Negative Impact: If you miss payments or overextend yourself, it could raise red flags for future lenders, even if your overall credit score doesn't immediately suffer.

In short, BNPL loans are starting to behave more like credit cards in the eyes of lenders. That means it's smart to treat them with the same level of care: track your balances, budget for payments, and avoid overcommitting.

Final Thoughts: Approach BNPL with Caution

The convenience of Buy Now, Pay Later is undeniable, but it's no longer a “no-strings-attached” option. As the credit reporting system adapts, your BNPL habits will become part of the bigger financial picture.

At Hanover, we help clients navigate the full range of credit and borrowing decisions, so you can make choices today that protect and build your financial future. If you have questions about how BNPL or other forms of credit could impact your long-term plans, we’re here to help.