How Buy Now, Pay Later Affects Credit Scores

Turbo Takeaways

• Buy Now, Pay Later plans will start impacting FICO credit scores as early as Fall 2025.
• BNPL programs are short-term installment loans that help consumers make retail purchases without an upfront payment.
• This payment method started in the 1800s and became popular in modern retail through digital apps.

How Does Buy Now, Pay Later Affect Your Credit Score?

Until recently, Buy Now Pay Later remained an undisclosed method for borrowing on credit in small installments. Consumers could take out these small, installment loans without impacting their credit score.

However, FICO, the nation’s biggest credit analyst, has decided to add BNPL loan data to credit-scoring models beginning in the Fall of 2025.

For years, credit analysts struggled with how to use this popular payment method to analyze risk. Although the structure of Buy Now, Pay Later mimics a short-term loan, consumers can open several accounts in a brief timespan, making it a unique consideration in creditworthiness.

Like other forms of credit, BNPL’s impact on your score will depend on how you use it. If you’re buying a large piece of furniture with a Buy Now, Pay Later plan, making on-time, regular payments for the allotted number of months will likely help your score. Conversely, taking out a BNPL loan for an online purchase and forgetting to pay your monthly installment could negatively impact your score, just like a missed credit card payment.

What Is Buy Now, Pay Later?

Buy Now, Pay Later (BNPL) is a popular financing method that breaks payments into equal, often interest-free installments. BNPL plans also allow consumers to defer an initial payment while still collecting a product at the time of purchase. These plans function like short-term loans, allowing consumers to make small to mid-sized purchases on credit with minimal setup and fees.

BNPL apps and retailers offer plans ranging from pay-in-two (with consumers paying off debts in two payments within four weeks) to 60-month installment loans. Most plans include a simple application process with a brief credit check and quick approval for purchases. Online retailers make this process simple, with BNPL options often popping up in your cart at checkout.

History of Buy Now, Pay Later

Consumers began using the Buy Now, Pay Later method in the mid-1800s when the Industrial Revolution made mass-produced goods readily available. Experts credit Singer Sewing Machines as the first major retailer to market installment payments. The sales team’s “dollar down, dollar a week” method and easy payment plans helped the company triple sales internationally in one year. Other brands took notice, and soon pianos, furniture, and farm equipment became the next popular products bought with credit.

In the decades leading up to the Great Depression, buying on credit and paying later became so popular that even banks participated, making this financial habit a major reason behind the devastating financial crash of 1929.

With the boom of modern consumer goods in the 1950s, credit cards joined BNPL as a top way to purchase nearly any good or service. Almost a century later, credit organizations are assessing Buy Now, Pay Later as part of a consumer’s creditworthiness.

Top Buy Now, Pay Later Apps

Buy Now, Pay Later programs have become popular options for digital retail purchases, with multiple apps offering flexible payment plans. Consumers can download an app to a preferred device or use a retail partner to set up payments ranging from one month to several years.

Most applications perform a soft credit check, a brief peek at your history that doesn’t impact your credit score but gives a valuable picture of your creditworthiness. Many apps also look at a consumer’s history with their own brand to find past payment data.

Although most apps offer similar services for purchasing goods, subtle differences in fees and interest rates could make a difference about how much you’ll pay and how you set up your plan. Here’s a breakdown of some of the most popular BNPL apps used by consumers:

Buy Now, Pay Later Apps

Should You Use BNPL Loans?

While BNPL apps make it convenient to purchase goods, they may not always be the best solution. It’s typically better to make a purchase using cash or wait until you have sufficient funds to buy a big item. Buy Now, Pay Later plans put you in debt like any other personal loan, so it’s important to consider your financial situation before setting up a BNPL payment.

However, if you’re in a situation where you can finance something you need without heavy interest payments, Buy Now, Pay Later plans can work to your benefit. Most BNPL apps offer zero interest if you can pay back your loan within two payment cycles. Anything beyond two months and you’re likely facing interest charges that could climb higher than the average credit card.

Another important consideration is your credit score. Until recently, BNPL loans weren’t counted as part of your credit history and had no impact on credit-scoring models. Now, FICO, the nation’s leading credit data firm, plans to use Buy Now, Pay Later plans to build a consumer’s credit history, leading to scoring fluctuations that depend on payment habits.

Pros of BNPL

• Zero interest if paid off entirely in two payments
• Soft credit check only
• Some apps are favorable to consumers with bad credit
• Short, flexible terms

Cons of BNPL

• High interest on monthly installment plans
• Most apps charge various fees
• Missed or late payments factor into credit scores
• Returns and payment disputes may become complicated due to third-party services

Buy Now, Pay Later for Bad Credit

For consumers with bad credit, BNPL plans seem to offer a solution with less stringent credit checks or no checks at all. The Consumer Financial Protection Bureau (CFPB) found that 45% of BNPL users have bad credit and are likely to carry debt from other sources.

Buy Now, Pay Later loans work best for small to moderate purchases that you can pay back within a short timeframe. Otherwise, you run the risk of compounding your interest and dropping your credit score even further. If you’re already struggling with debt, it’s crucial to avoid missed or late payments that will continue to lower your credit score while you try to pay off a BNPL loan.

Consumers with bad credit who decide to use BNPL as an option should look for apps that offer zero interest and no fees. While most programs require only a soft credit check that doesn’t ding your score, some skip this step or use your current credit cards to set up payments, making it easier for those with bad credit to get accepted.

Even with bad credit, BNPL apps may work with borrowers by providing a counteroffer instead of rejecting a loan application. For example, if your credit score is lower, BNPL lenders may ask you to provide money down. You’ll likely get the loan despite your low credit if you meet the counteroffer.

Overcome Debt With Help from TurboDebt

If you’re overwhelmed with heavy debts from credit cards, BNPL plans, and other unsecured balances, turn to TurboDebt® for expert debt relief help. Our A+ rating from the Better Business Bureau, plus thousands of positive client reviews across Trustpilot and Google, make TurboDebt a proven consumer partner for paying off debt.

Here are a few more reasons we think you’ll benefit from our debt relief program:

• Pay off debt for less than what you originally owed
• Avoid late fees (we never charge for missed payments)
• Live debt-free in an average of 24-48 months
• Create a custom plan with expert guidance

Take a few minutes to start a free consultation and find out if you qualify for our debt relief program. Start rebuilding your financial future with the team at TurboDebt today!