Buy Now, Pay Later
How BNPL is handled at Experian
When shopping today, you may see an offer to pay for the item you're purchasing with just a few equal payments. These types of offers are known as “buy now, pay later” or BNPL loans or financing. Many consumers enjoy the convenience and flexibility of splitting payments, but you need to understand how these options work and how they might affect your credit. This page provides important information to enable you to take advantage of the benefits of BNPL loans without damaging your creditworthiness.
BNPL stands for "buy now, pay later."
A BNPL loan refers to a payment method that allows consumers to make a purchase, typically with a down payment, and pay for it over time. With the most common BNPL type (referred to as “pay-in-4”), payments are split into four equal installments or biweekly payments over 6 weeks, without any interest or fees, as long as the terms are met on time, with no late payments. Some lenders may charge additional fees.
A BNPL loan offers consumers an alternative to using traditional credit cards or personal loans to make purchases. Some benefits include:
The information won't be factored into existing traditional credit scores at this time but may in the future as new credit scoring models are developed. Policies may differ at the other national credit reporting companies — Equifax and TransUnion.
See “How does a BNPL loan impact my credit score?” above. BNPL loans represent additional debt that could affect a person’s ability to repay other financial obligations so, reasonably, should be part of a credit history. As of today, the scoring models that exist — and are most commonly used by lenders — aren't designed with BNPL in mind but, as previously stated, they may in the future as new credit scoring models are developed.
As BNPL information is more widely reported to Experian by BNPL providers, a consumer’s BNPL history will be visible to lenders that request an Experian credit report. This enables them to make more informed decisions when determining whether to extend credit offers. For that reason, you should be mindful about how much BNPL debt you have at any given time.
As stated in the previous question, as BNPL information is more widely reported to Experian, lenders will have greater visibility into BNPL histories. If you use BNPL loans responsibly, don’t take on more debt than you can manage and make all your payments on time, your BNPL payment history could enable you to qualify for new credit and other forms of credit in the future.
If you have a BNPL loan that’s currently reported to the credit bureaus, it could potentially impact your ability to get new credit if you don’t make your payments on time.
When a BNPL loan is reported to Experian, it will appear in the credit report similarly to other loans but will be clearly marked as a BNPL loan.
Experian's consumer credit report is designed to be easy to read and understand. It’s written in simple language with no strange abbreviations or coding.
Consumer credit reports include four types of information:
Consumer reports will also show details about your BNPL account, including:
A very wide range of products can now be purchased using BNPL, and that range is growing rapidly. However, some BNPL lenders may have specific agreements with merchants or retailers, limiting the types of products or services that can be purchased using their loan platform. These restrictions can vary based on the lender and the specific terms of the loan. Some examples of restrictions may include financial products, gift cards and digital currencies.
BNPL loans often come with limits on the amount you can borrow for each purchase. These limits can vary depending on factors such as the BNPL lender being used, your payment history with that lender, how long you've been a customer of that BNPL lender and the specific retailer you're purchasing from. The loan amounts and length/terms of the loans can also vary greatly among different lenders.
It's important to check the BNPL lender’s terms and conditions to understand any limits on purchase amounts.
In many cases, you can pay off a BNPL loan early without incurring additional fees.
However, it's important to note that each BNPL lender may have different policies regarding early repayment. Some lenders may allow early repayment without penalties, while others may have certain conditions or charges associated with early repayment.
Review the terms and conditions of your specific BNPL loan or contact your lender directly to confirm their policies regarding early repayment and any potential fees.
If you're unable to make the full payment on a BNPL loan by the due date, there can be various consequences depending on the specific terms and conditions set by the lender. Here are some potential outcomes:
It's important to remember that the consequences may vary depending on the specific BNPL lender and its terms. To avoid these outcomes, carefully review the terms and conditions of the BNPL agreement before making a purchase, budget for timely payments and communicate with the provider if you anticipate any difficulties in making the full payment by the due date.
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