Weston: How buy now, pay later loans could alter credit

Like any easy credit, these plans can tempt people to overspend. Buy now, pay later loans are also largely unregulated and lack the consumer protections that cover credit and debit card purchases. Additionally, the Consumer Financial Protection Bureau is investigating how buy now, pay later lenders are using the payment and purchase data they collect from customers.

CREDIT OFFICES ALWAYS WORK ON THE DETAILS

Credit bureaus want access to this payment data, hoping they can offer traditional lenders insight into how these borrowers might handle other types of credit.

Offices are not altruistic, of course. These are private companies that want to make a profit. But in doing so, the bureaus could help expand access to credit by identifying borrowers who can manage credit among the millions of “invisibles” – people with no credit history – as well as those who have too little information on file. files to generate credit scores. TransUnion’s Pagel called buy-it-now, pay-later data the biggest opportunity for financial inclusion in a generation.

How the offices will go about this is still in the works. Two of them, TransUnion and Experian, say that for now the information will not be included in regular credit reports, but lenders will be able to request it. The third bureau, Equifax, says it will feed the data into people’s credit reports.

But the leading credit-scoring company, FICO, is still studying buy-now-pay-later data to see how well it predicts how people might handle further credit. There’s not even agreement yet between the bureaus on whether the loans should be treated as revolving debt, like credit cards, or as installment loans, which typically last much longer.

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