BUYERS will soon have to buy now, pay later the payments included in their credit report – and that could hurt your score if you’re not careful.
More than 45 million Americans were expected to use BNPL services last year.
This can work well for those who make their payments on time, but many end up spending more than they can afford – and then struggle to make the payments.
And starting in the first quarter of this year, Equifax becomes the first of the Big Three credit reporting agencies to include BNPL information on reports.
The goal is to give lenders a more complete picture of consumers’ payment habits and financial commitments.
Equifax also says research has shown that including on-time BNPL loan payments in credit reports can also boost credit scores.
But if you find it difficult to make the payments on time, you can expect late payment fees, which would hurt your score as well.
While Equifax is first, rivals TransUnion and Experian have also indicated they will follow.
The risks of buying now, paying later
BNPL plans have not always been well regarded as they do not require a credit check.
Therefore, it is quite easy for consumers to qualify for a BNPL arrangement, even if they are not in the best financial position.
According to a recent study by Credit Karma, 34% of consumers who used BNPL services fell behind on one or more payments.
Late payments can incur charges or even put you on debt collection lists under the terms of the BNPL provider.
Another survey by Credit Karma found that 72% of those who missed a payment saw their credit score drop as a result.
BNPL plans under scrutiny
As these plans have become increasingly popular, they have also come under more scrutiny and criticism.
the Consumer Financial Protection Bureau (CFPB) is concerned that consumers are taking on too much debt and BNPL suppliers are circumventing laws.
As a result, he requests information from five of the biggest players.
Announcement of the order in December, the federal agency said it was seeking information on the “risks and benefits of these fast-growing loans” from Affirm, Afterpay, Klarna, PayPal and Zip.
A PayPal spokesperson said at the time: “Our customers trust us to be transparent and we take that responsibility very seriously.
PayPal is reviewing the letter and we will continue to work productively with the CFPB to provide the requested information.”
The Sun also explains how to establish your credit score and how to check your credit score.
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