We love microlending, don’t we, folks? Unlike old-school credit cards, with their days-long approval processes and prior credit minimums, buy-now, pay-later (BNPL) apps — companies like Klarna and Afterpay — offer hard-up customers instant financing options to buy the junk they crave the instant they see it.
In the United States, purchases made with these apps currently don’t even affect your FICO credit score — or at least, they never used to.
That’s all about to change this fall, when Fair Isaac Corp, one of the largest credit scoring bureaus, is slated to begin factoring BNPL data into individual credit scores, as first reported by the Wall Street Journal.
The move is a huge deal for the financial sector and US consumers, marking the first time FICO has ever specifically reckoned with a particular type of loan — as opposed to treating all loans equally — FICO vice president of scores and predictive analytics Ethan Dornhelm told the WSJ.
Up until now, lenders have mostly been kept in the dark regarding how much debt individual consumers have taken on. Though companies like Affirm have recently begun sharing BNPL data with credit bureaus, the industry hasn’t agreed on how to use it.
Per Wired, BNPL has become an essential part of the economy in developed countries, with over half of all Americans using it to finance stuff like lunch deliveries and school supplies. The cumulative effect is significant: as early as 2022, BNPL apps had already caused a “permanent increase” in household retail spending.
Behind that growth are companies like the aforementioned Klarna, which have grown BNPL from a relatively niche financial market in 2020 to a $94 billion pit-o-money in 2024. By this year, the WSJ notes, the BNPL market is expected to reach $108 billion in value.
As some economists have noted, the model could have upsides for borrowers who pay their debt on time. But there will also be huge consequences for the credit scores of those who’ve fallen behind on payments, or who’ve chained multiple microloans on top of each other. Unfortunately, those borrowers likely make up a huge piece of the BNPL pie.
As the US Federal Reserve outlined in a May survey, low-income households bringing in less than $50,000 a year make up the biggest users of BNPL services. And as the BNPL market grows — taking advantage of cash-poor workers — so too does the number of borrowers using it to finance basic necessities, like groceries.
And unsurprisingly, when more and more desperate people turn to BNPL as a last-minute payday loan, the number of late payments skyrocket.
Between 2024 and 2025, the rate of late payments in the US grew by 7 percent, as the amount of regular BNPL users financing groceries jumped from 14 to 25 percent. Meanwhile, 40 percent of BNPL borrowers reported stacking multiple loans together at a time.
“I do think it’s going to get worse, at least in the short term,” Matt Schulz, a consumer financial analyst told CNBC. “I don’t know that there’s a whole lot of reason to expect these numbers to get better in the near term.”
As BNPL debt grows, so too can inflation and the risk of a systemic banking crisis. The resulting loss of credit scores that might stem from FICO’s decision can have huge impacts on the economy, affecting the housing and labor markets while dramatically increasing consumer debt.
Whether the data hidden within the BNPL market causes a widespread debt crisis is largely up to the credit models used, and the consumers themselves. One thing’s for sure: with BNPL regulation a long way off, consumer debt isn’t going anywhere but up.
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