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Education

Making BNPL credit reporting work How is this going to work?

Equifax first created a policy for
Srii Srinivasan accepting BNPL tradelines in
Chargeback Gurus consumer credit files in accordance
with
Industry
Data
Consumer
quifax is set to become the first credit reporting agency to factor Association Metro 2 guidelines. Per
in buy now, pay later (BNPL) payment histories when calculating this policy, the company will begin
consumer credit scores. As of this writing, Equifax is on the verge including "pay-in-4" BNPL plans in
E of issuing a new policy and resources for reporting BNPL activity, its credit reporting calculations.
which can then be considered alongside credit cards and other loans.
According to Klarna, pay-in-4 is the
While Equifax touts this move as one that will be generally beneficial to most popular BNPL format, allowing
consumers, some may find their scores taking a hit—and BNPL merchants have the customer to split the cost of a
concerns of their own. purchase into four equal installments,
with the first paid upfront and the
BNPL plans have exploded in popularity recently, but little has been done remaining three paid biweekly. These
to track and evaluate them in a credit reporting context, as is done with plans are usually too small to get
other personal loans. While larger BNPL loans may be reported, most BNPL reported as personal loans. Afterpay,
transactions have flown under the radar. for example, reported its average plan
is for $150.
The disconnect between BNPL and traditional credit schemes is partly what
makes it attractive to consumers—usually, they need not submit to a credit Credit reporting agencies haven't dealt
check to start a plan—but it also means those consumers are missing an with biweekly payment schedules
opportunity to get payments made on time documented and demonstrate that before, making it logistically difficult
they can be low-risk borrowers. to throw BNPL payments into the
mix. To address the technological
challenges, Equifax is creating a new
business industry code to identify
BNPL transactions. This will make
it easier for Equifax's partners and
customers to manage BNPL payment
history data and factor it into their
decision-making processes.
BNPL data Equifax will record
includes the date the BNPL plan was
opened, payments scheduled per the
agreement and payments actually
received. According to the Wall Street
Journal, the other credit reporting
agencies, Experian and TransUnion,
are also expanding their capability to
include BNPL reporting.
Will this help or hurt consumers?

Equifax believes this move will be
a net positive for consumers. In a
press release, Mark Luber, Equifax's
chief product officer for U.S.
information solutions emphasized
"the role that BNPL services can play
in helping people build stronger
financial profiles" and stated that
BNPL customers would be able to
"demonstrate reliable behavior and
boost their credit profile."

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