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Buy now, pay later platform Affirm Holdings Inc. early Tuesday announced it will begin credit reporting for all its loan products to TransUnion LLC, effective May 1. TransUnion is the second of the three credit bureaus to which Affirm is reporting. In March, San Francisco-based Affirm announced it would begin credit reporting to Experian as of April 1.
Data reported by Affirm will not be used by TransUnion to calculate consumer credit scores for the time being. Instead, consumers will be able to see details about all Affirm transactions on their TransUnion credit reports. BNPL payment data is tagged and segmented into a section of the core credit file, but is excluded from non-BNPL scores and attributes, TransUnion says in a blog post.
As more BNPL providers report consumer-payment data, TransUnion plans to make that information available to help BNPL lenders make more informed decisions. TransUnion, which only began receiving credit-reporting data from BNPL lenders during the fourth quarter of 2024, currently receives data from two other, unnamed BNPL lenders, the credit bureau says.
TransUnion expects BNPL payment data will eventually be incorporated into consumer credit scores once credit-scoring models are adjusted to treat BNPL trade lines“ as a new type of credit obligation and not as multiple, small unsecured installment loans,” the company says in its blog.
“This is a new type of credit obligation that scores are not equipped to factor in,” Liz Pagel, senior vice president and global head of alternative data for TransUnion, says by email. “Data scientists will need to work with the data to determine how best to incorporate BNPL loans. This will take time and we also will need more furnishers for a more robust sample.”
For its part, Affirm expects the reporting of consumer-payment data to the credit bureaus will make its loan products “even more mainstream,” Affirm president Libor Michalek, says in a statement.
In 2022, TransUnion launched the ability to tag BNPL data as a new loan type, while preventing such data from flowing into credit scores, attributes, and credit decisions. “In the meantime, BNPL lenders intending to report BNPL data and point-of-sale loans to TransUnion have been working to stand up furnishing and disputes processes — often from the ground up,” the credit bureau says in its blog. The credit bureau has been working with BNPL lenders since 2019.
A key driver behind the trend of BNPL data being tracked by the credit bureaus is that as BNPL loans have grown in popularity“ consumers deserve the opportunity to build credit based on their ability to handle these obligations, just like with other credit products,” Pagel says.
Research by TransUnion research found nearly 40% of consumers that have not used buy now, pay later are likely or very likely to take out a BNPL loan in the future. In addition, some 53% of non-BNPL users would be likely or very likely to use them if it had the potential to have a positive impact on credit scores.
“Consumers who successfully manage BNPL payments should be able to build credit over time, and I believe this could be the most significant financial inclusion opportunity in generations,” says Pagel.
