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business Tuesday 15 March 2022
How buy now, pay later loans could alter credit

By LIZ WESTON of NerdWal- TransUnion and Experian,
let say that for now, the infor-
Expanding access to credit mation won't be included
is a worthy goal. Too many in regular credit reports,
people can't get a mort- but lenders will be able to
gage or an emergency request it. The third bureau,
loan at a reasonable rate Equifax, says it will incorpo-
because they can't show rate the data into people's
a solid credit history. They credit reports. But the lead-
may pay more for insur- ing credit scoring compa-
ance or make large secu- ny, FICO, is still studying buy
rity deposits to get utilities or now, pay later data to see
rent an apartment. how well it predicts how
Recently, the three major people might handle oth-
credit bureaus announced er credit. There's not even
plans to incorporate "buy agreement among the bu-
now, pay later" plans, a reaus yet about whether
hugely popular type of the loans should be treated
point-of-sale financing that as revolving debt, like cred-
until now remained most- it cards, or as installment
ly outside the traditional loans, which typically last
credit ecosystem. much longer.
But no one should expect "It's such an important
that their buy now, pay question because how it's
later purchases will instant- reported makes a definite
ly open the door to better difference in how it will im-
credit. If you want reliable pact the score," says Ethan
access to the largest num- Dornhelm, FICO's vice pres-
ber of lenders, building ident of scores and predic-
credit through traditional tive analytics.
means is still the better HOW YOU CAN BUILD BET-
route. TER CREDIT NOW
BUY NOW, PAY LATER LOANS If you're currently trying to
SOAR IN POPULARITY build or rebuild credit, you
If you bought anything on- probably don't want to
line recently, you likely en- wait around for these de-
countered a buy now, pay tails to get sorted out.
later option that offered to Consider asking someone
split your purchase into a responsible with credit to
few installment payments. add you as an authorized
Retailers partner with lend- user to their credit card.
ers such as Affirm, Afterpay Other options include a
and Klarna to offer the pay- credit-builder loan or a se-
ment plans, which typically cured credit card from a
don't require a hard credit lender that reports to all
check and may not charge three bureaus.Credit-build-
interest. With the popular This undated file photo provided by NerdWallet shows Liz Weston, a columnist for personal finance er loans, offered by credit
four payment option, for website NerdWallet.com. unions or online, place the
example, you pay off your Associated Press money you borrow into a
balance in four equal, in- savings account or cer-
terest-free installments due Like all easy credit, these rowers might handle other have a credit history — as tificate of deposit that you
every other week. Instead plans can tempt people to types of credit. well as those who have too can reclaim after you make
of charging interest, lend- overspend. Buy now, pay The bureaus aren't being little information in their files all the monthly payments.
ers get a percentage of later loans also are largely altruistic, of course. They're to generate credit scores. A secured credit card typi-
what you spend from the unregulated and lack the private businesses that TransUnion's Pagel has cally gives you a line of
retailer, similar to the inter- consumer protections that want to profit. But in doing called buy now, pay later credit equal to the deposit
change fees charged by cover credit card and deb- so, the bureaus could help data the greatest financial you make at the issuing
credit cards. it purchases. In addition, expand access to credit by inclusion opportunity in a bank. These aren't instant
Buy now, pay later services the Consumer Financial identifying borrowers who generation. fixes for bad or no credit, of
proliferated as the pan- Protection Bureau is inves- could likely handle credit How the bureaus will go course, but they're proven
demic shifted much shop- tigating how buy now, pay among the millions of "invis- about this is still a work in ways to expand your own
ping online, but the plans later lenders use the pay- ibles" — people who don't progress. Two of them, access to credit now.q
are now available for travel ment and shopping data
and health care and as an they harvest from custom- LIKE US ON
option at some brick-and- ers.
mortar retail stores. Nearly CREDIT BUREAUS ARE STILL
100 million people used a WORKING OUT THE DETAILS
buy now, pay later option The credit bureaus want
in the past year, says Liz Pa- access to that payment
gel, senior vice president of data, hoping they can of-
consumer lending for credit fer more traditional lenders Facebook.com/arubatoday/
bureau TransUnion. insights into how these bor-