In a First, Equifax Adds BNPL Payment Data To Credit Reports

To help buy now, pay later lenders better manage the risk associated with each applicant, Equifax Inc. on Monday announced it will begin in 2022 including BNPL payment data in consumer credit reports. To report the data, Equifax has created a new code to designate BNPL tradelines in consumer credit files using Consumer Data Industry Association Metro 2 guidelines. The company says it will be the first credit-reporting company to include BNPL data.

The move is expected to help consumers who take out and repay the BNPL loans build their credit scores. At the same time, adding BNPL payment data will help lenders better manage their risk by identifying consumers who have defaulted on BNPL installments. More than a third (34%) of consumers who have taken out a BNPL loan have missed at least one payment, according to personal finance company Credit Karma.

“Equifax will be the first credit-reporting agency to formalize a standard process for reporting BNPL tradelines for inclusion on traditional consumer credit reports,” Mark Luber, chief product officer for U.S. information solutions at Atlanta-based Equifax, says in a prepared statement. “We are committed to helping people live their financial best and recognize the role that BNPL services can play in helping people build stronger financial profiles.”

Reporting BNPL data can help consumers raise their credit scores, which can be especially beneficial for consumers with thin credit histories or who are looking to raise their credit score. A recent consumer survey by Equifax revealed the majority of respondents who had an on-time BNPL tradeline in their credit report raised their Fair Isaac Corp. (FICO) credit score 13 points, on average.

Consumers with thin credit profiles, that is, credit profiles consisting of two or fewer credit tradelines, also benefited significantly from the inclusion of BNPL payment data in their credit report, according to Equifax. Among this demographic, adding BNPL data increased FICO scores an average of 21 points. In addition, consumers with troubled credit histories, that is, those who have late payments reported in their credit profile, saw their credit scores rise 13 points with the inclusion of BNPL payment data in their credit profile. 

“Most BNPL providers either bypass the credit check completely, or do a soft pull on credit files, which can be attractive to consumers,” Luber says. “We are encouraging BNPL providers to report into Equifax as a powerful source of data. Those who use BNPL services that report can demonstrate reliable behavior and boost their credit profile.”

Historically, credit bureaus have faced technical difficulties incorporating installment plans like BNPL in their files, according to reporting Monday by The Wall Street Journal. Among the challenges is that credit files typically aren’t designed to include payments occurring as often as every two weeks. Also, the interval between when users open a BNPL account and when companies send the data to credit bureaus is often longer than the repayment period typical of a BNPL program, according to the WSJ story.

BNPL programs can vary, but they typically allow consumers to repay a relatively small purchase in four installments over a six-week interval, at no interest.