If youve ever used Buy Now, Pay Later (BNPL) services like Afterpay, Klarna, or Affirm, youre not alone.
These platforms have become a popular way for shoppers, especially younger consumers, to afford big-ticket items without paying the full amount upfront.
But a major change is on the way that could affect your credit score.
Shakeria Hawkins found out what this entails and what it means for shoppers. Buy now, pay later loans will soon impact your credit score
Keion Bell, co-owner of The Hause Collectivea vintage streetwear shop inside Meadows Mallsays many of his customers use BNPL services to buy clothing. For him, its been a win-win.
You can get a lot of stuff in here with Afterpay for sure, Bell said. I told one customer it was four easy payments with no interestand he was cool with that. So we made the sale.
However, starting later this year, that same flexibility could come with more financial responsibility.
BNPL companies like Afterpay and Klarna will begin reporting users loans and payments to FICO, the company behind the most widely used credit scoring models.
That means your BNPL purchases could now help you build creditor hurt it if you fall behind on payments.
Financial analyst Ted Rossman with Bankrate says the shift could be beneficial, especially for young or credit-invisible consumers.
I still think this is a step in the right directionespecially for younger people, Rossman said. Many BNPL users may have lower incomes or no credit score at all, which is why theyre drawn to these services in the first place.
Still, there are important details to keep in mind.
Rossman points out that credit reporting will not be mandatory. Some BNPL providers may choose to report loan data, while others may not. In addition, the three main credit bureausEquifax, Experian, and TransUnionmay not receive the same information.
All of us have multiple credit scores, Rossman explained. Theres FICO and VantageScore, and even within FICO, there are versions like FICO 8, 9, 10, and 10T. They all follow similar principleslike paying on time and keeping debt lowbut the reporting systems arent identical.
Back at The Hause Collective, Bell hopes the change wont drive customers away but instead empower them.
I know a lot of people who dont have the best credit, he said. If they can buy something for $60 and it helps their credit, Im pretty sure theyll go for it.
BNPL companies are expected to start reporting to credit bureaus this fall. Experts recommend that users track their payments closely and stay up-to-datebecause soon, your shopping habits could show up on your credit report.