Will line items look like CCs or installment loans?


Today the WSJ reports that Buy Now, Pay Later updates will begin at Equifax, with Experian and TransUnion to follow soon.

…OK, I jumped at the gun this morning to see if the many BNPL plans I opened and paid for were on my credit file at the central site, www.monrapportannueldecredit.com. When I looked at all three offices, the only sign that I ever applied for or paid for a BNPL loan was an Affirm purchase from Walmart. Interestingly, the update was at Experian for a $245 transaction, marked “paid, closed/never late”.

That’s the only item so far, with Experian, not Equifax, as the WSJ mentioned. In any event, the report was accurate. In January 2021, we documented my field research, which began with Plan It Pay It from American Express in March 2019, followed by PayPal, into my 22-year-old account that isolates me from merchants and scammers on the Internet .

Then it continued with Afterpay and Affirm. The research continued through the 2021 winter holiday season, and I did a few more. You can find a summary of these events in this Mercator viewpoint: BNPL Loan: Confessions of a Credit Card Manager.

One of the reasons to follow all three credit bureaus is to see if the reports are consistent. For example, the WSJ article mentions, “Equifax will classify four-pay loans as revolving lines of credit or installment loans on your report.”

That’s my problem. Aren’t BNPL loans installment lines of credit?

How FICO scores measure things matters. As mentioned earlier, my wife has a better FICO score than me because I like to field test credit card offers. Call me a dot-hog, but that’s how I roll.

According to FICO websitewhere they review the history of the score, these are the main attributes used in building the score.

  • Loan repayment history
  • Amounts due
  • Length of credit history
  • New credit accounts
  • Credit applications
  • Types of credit used

And not all attributes are treated the same:

So, based on the lack of a standard way to report an BNPL loan, whether installment or revolving, offices may report inconsistent data in the FICO Score metric.

The numbers would be the same for amount of debt, length of credit history, payment history, but the credit mix will be different. With reports from the three main bureaus, hopefully there is a common definition of what is now BNPL on the regulatory radar.

Who knows, maybe we’ll get back to scoring consistency once the process is settled. But for now, see reporting as an important step towards maturing the BNPL product.

Preview by Brian RileyDirector, Credit Advisory Services at Groupe Conseil Mercator


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