Affirm's Buy Now Pay Later Reporting to Credit Bureaus: What You Need to Know

Affirm will now report Buy Now Pay Later activities to Experian, impacting your credit report. This change could influence your creditworthiness and financial health. Learn how to navigate this shift and make informed financial decisions to maintain a strong credit profile.

Affirm, a leading Buy Now Pay Later (BNPL) service, has announced a significant change in how it reports consumer payment activities. Starting April 1, Affirm will provide information on all installment loan products to the credit bureau Experian. This move marks the first time a major BNPL provider has decided to report these short-term loans to the credit-reporting system. Traditionally, BNPL activities were not included in credit reports, which meant they did not impact your credit score. However, this change could have implications for your financial health and creditworthiness.

Experian supports this initiative, stating that it will help lenders make more informed decisions about extending credit and assist consumers in building their credit history. While Affirm's reporting will not immediately affect traditional credit scores, it may do so in the future as new credit scoring models are developed. This means that paying on time and in full can positively impact your credit history, while missed or overdue payments could lower your score.

Affirm has clarified that certain factors will not impact your credit score, such as opening an account, checking purchasing power, and "pay now" transactions. However, "pay over time" plans, payment history, late payments, credit utilization, and the length of your credit history may influence your score.

As Affirm is currently the only major BNPL company reporting to any of the three credit bureaus, other BNPL lenders and agencies like Equifax and TransUnion might follow suit. This development underscores the importance of being strategic and calculated when using BNPL services. While these plans offer convenient, interest-free payment options, they can also tempt consumers to make unaffordable purchases, leading to late payments and a restrictive repayment cycle.

If you find yourself unable to pay for a purchase in full, consider postponing it, exploring alternative ways to afford it, or using a 0% interest credit card with a plan to pay off the balance before interest accrues. This approach can help you avoid the potential pitfalls of BNPL plans and maintain a healthy financial profile.