CFPB / RegulatoryFintechPayments

Equifax to add credit reporting to ‘Buy now, Pay later’ plans

Credit reporting agency Equifax will begin including ‘buy now, pay later’ installment purchases on consumers’ reports within the next year.

The Atlanta-based firm will become the first major credit-reporting company to make the move, according to a statement to Bloomberg on Monday. Of course, for Equifax to be able to report on these deferred payment options, the company will have to gain access to customer data via BNPL giants like Affirm and Klarna.

“Most BNPL providers either bypass the credit check completely, or do a soft pull on credit files, which can be attractive to consumers,” Mark Luber, chief product officer for Equifax’s U.S. information-solutions division, said in the statement.

“We are encouraging BNPL providers to report into Equifax as a powerful source of data. Those who use BNPL services that report can demonstrate reliable behavior and boost their credit profile,” Luber continued.

Equifax’s plans arrived at a pivotal time for BNPL as less than a week ago, the Consumer Financial Protection Bureau (CFPB) issued a series of orders to five of the largest BNPL companies in an effort to collect information on the risks and benefits associated with BNPL tech.

According to a release, the CFPB is concerned about accumulating debt, regulatory arbitrage and data harvesting in a market saturated with growing BNPL options.

As part of Equifax’s new reporting strategy, the firm is set to implement a new “business industry code” to classify loans reported by BNPL providers. Those who use Equifax data, such as banks, will then be able to decide how to use that data in their underwriting.

A recent study by Equifax found that a majority of consumers were helped by having an on-time buy-now, pay-later trade line in their credit file with consumers’ credit scores increasing by an average of 13 points.

However, according to the results of a Credit Karma survey released in September, 44% of respondents said they had used a BNPL service at least once, and 34% of those respondents had fallen behind on one or more payments.

More than half of Gen Z and millennial respondents who have used BNPL services say they have missed at least one payment, compared to 22% of Gen X and just 10% of Boomers, leading agencies to worry if BNPL options have more predatory effects on younger generations.

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