By Imani Moise

If you buy a pair of shoes and choose the option to pay later, it could show up on your credit report.

Affirm, one of the largest "buy now, pay later" lenders, on Tuesday will begin furnishing all new loans to Experian, similar to how a mortgage or car loan shows up on your credit report.

So far, the change to this fast-growing form of consumer debt only applies to Affirm loans and Experian credit reports. But other lenders and credit bureaus may soon follow suit.

TransUnion, for example, has started collecting data from two BNPL providers and says it is working to make the information available to consumers and lenders soon, once it has a more complete data set.

The details

Affirm offers short-term, interest-free loans at checkouts that allow you to buy something and pay for it in four installments over six weeks. Unlike credit-card debt, these "pay in four" loans typically haven't shown up on credit reports. Now, all new Affirm loans -- whether paid on time or late -- will appear on credit files. Previously, Affirm only reported longer-term, interest-bearing loans to credit bureaus.

Adding these accounts to reports won't immediately have an impact on credit scores, since traditional scoring models haven't yet been updated to include this type of debt. But they may soon, Experian said.

A joint study from FICO and Affirm in February found that 85% of BNPL users saw score changes of fewer than 10 points by adding the accounts to the credit report under a simulated model.

The context

BNPL loans have been a multibillion-dollar blind spot in the credit-reporting system.

Usage skyrocketed during the pandemic as more retailers added the installment plans at checkouts. In 2022 alone, Americans opened more than 277 million BNPL loans worth $34 billion, up from 180 million and $24 billion the year before, according to the most recent data from the Consumer Financial Protection Bureau.

The consumer watchdog, under previous leadership, has flagged growing concerns about "loan stacking," where consumers juggle multiple BNPL loans at once. In 2022, 63% of users had more than one loan at a time; 33% had loans across multiple providers.

Because most BNPL loans haven't been reported to credit bureaus, lenders have had limited visibility into how much debt borrowers were actually carrying. That means an auto lender underwriting a $20,000 car loan might not know if their customer had recently financed a new designer belt. This shift is designed to close the gap and could pave the way for other BNPL firms and bureaus to do the same.

What this means for me

If you are using BNPL loans to budget or spread out purchases, those transactions might now follow you. That can be good or bad, depending on how you manage them.

On-time payments could help build credit and boost your score, especially if you are new to borrowing. But taking on too much debt or missing payments could raise red flags for lenders reviewing your report -- even if it isn't reflected in your score. It pays to treat these installment plans more like a credit card and less like a layaway plan.

Write to Imani Moise at imani.moise@wsj.com

(END) Dow Jones Newswires

April 01, 2025 09:00 ET (13:00 GMT)

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