Affirm to Report Buy Now, Pay Later Loans to Credit Bureaus

In a significant shift for the fast-growing buy now, pay later (BNPL) industry, Affirm Holdings Inc. will begin reporting the payment history of some of its customers to credit bureaus. The move could help borrowers build credit histories, but also expose those who fall behind on payments.

Credit Building Opportunity

Starting this month, Affirm will report loan details for “select” customers to Experian PLC. The data, which includes payment history and amount borrowed, will be included in Experian credit reports and factored into FICO scores.

“We’re excited to help customers build their credit history through this initiative,” said Silvija Martincevic, Affirm’s Chief Commercial Officer. “Reporting to Experian is the first step in helping our customers gain greater access to more credit options.”

Risks for Struggling Borrowers

However, the move also means late payments will be visible to lenders. That could make it harder for some borrowers to secure credit in the future.

“If someone is regularly using BNPL and not making payments on time, that could have serious negative impacts on their credit score,” warned Matt Schulz, chief credit analyst at LendingTree.

Growing Scrutiny of BNPL

The BNPL industry, which includes companies like Affirm, Afterpay and Klarna, has exploded in popularity in recent years, especially among younger consumers. BNPL loans allow shoppers to split purchases into smaller, interest-free installments.

But the sector has faced growing scrutiny from regulators concerned about potential risks to consumers. The Consumer Financial Protection Bureau opened an inquiry into BNPL practices last December.

Limited Reporting Initially

Affirm’s credit reporting will initially be limited. Only loans with terms of 12 months or longer and amounts over $750 will be reported to Experian. Shorter-term, smaller loans, which make up the bulk of Affirm’s business, won’t be included.

The company also won’t report loans that are past due or in default. Affirm doesn’t charge late fees, and it writes off loans that are 120 days past due.

Shifting Industry Landscape

Affirm’s move could spur other BNPL providers to follow suit. Afterpay, which Block Inc. acquired earlier this year, has said it plans to begin credit reporting in the future but hasn’t provided specifics.

The credit reporting shift comes as competition in the BNPL space intensifies. Apple Inc. announced plans in June to launch its own installment lending service, Apple Pay Later.

As the BNPL landscape evolves, both consumers and lenders will be watching closely to see how credit reporting reshapes the industry – and impacts borrowers’ financial futures.

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