BNPL Plans: Black Friday's Hidden Credit Score Trap?

Record-breaking Black Friday sales are being fueled by a surge in Buy Now, Pay Later (BNPL) usage. Adobe anticipates over $20 billion in online spending via BNPL plans between November and December, marking an 11% rise from the previous year. This financial tool, popular among younger generations, allows for deferred payments, often interest-free.

However, the long-term implications of widespread BNPL adoption are becoming a concern. Starting this fall, FICO will integrate BNPL payment data into its credit scoring models. While intended to provide a more comprehensive view of creditworthiness, an over-dependence on BNPL could lead to negative consequences.

Late payments on BNPL plans are frequently reported to credit bureaus, potentially damaging credit scores and incurring fees. Worryingly, a recent report indicated that 41% of BNPL users missed at least one payment in the past year, with high-income earners, men, and young people among the most frequent late payers.