FICO to incorporate buy-now-pay-later loans into credit scores

Original Article ↗ Hacker News Discussion ↗

Impact of BNPL on Credit Scores

  • Some expect scores to fall as hidden “shadow” debt becomes visible, making borrowers look more leveraged and riskier for big loans like mortgages.
  • Others argue timely BNPL repayment should ultimately raise scores, though scores may dip while debt is outstanding.
  • Unclear how FICO will model this: as individual micro‑loans or a revolving line like a card, and how heavily it will weigh frequent small BNPL use.
  • Concern that responsible users get little upside, while a single missed or misrouted payment could do disproportionate damage.

BNPL vs. Credit Cards: Use Cases and Tradeoffs

  • Supporters see BNPL as:
    • Longer 0% repayment windows than typical card grace periods.
    • Accessible even to people with poor/no credit, functioning as a “starter” credit product.
    • A way to avoid high card APRs when a purchase can’t be cleared in one month.
  • Critics note that for disciplined card users, rewards + float usually beat the small interest arbitrage from BNPL.
  • Several warn BNPL’s “0%” often hides fees or deferred interest gotchas, with complex fine print and harsh penalties for a single slip.

Overleveraging, Mortgages, and Underwriting

  • Some fear many concurrent BNPL plans (especially for everyday items like food delivery) are an early sign of a looming “blow‑up.”
  • Others claim large numbers of small, successfully repaid accounts can be a positive signal, analogized to many paid‑off cards or installment loans.
  • Agreement that lenders already look at BNPL informally for mortgages; formal reporting will just standardize risk assessment.

Economics and “Hustle” of BNPL

  • BNPL is described as primarily merchant‑subsidized: retailers pay higher fees than card interchange to boost conversion and average order value.
  • Critics frame it as another demand‑inflating credit channel that pushes up prices for everyone.
  • There’s debate over whether BNPL lenders actually want low‑risk customers, or profit mainly from late fees and roll‑overs.

Debt, Credit Scores, and Systemic Issues

  • Ongoing argument over whether credit “should” be used mainly for productive investment vs. consumption smoothing and survival.
  • Many point out that for low‑income households, credit is often the only buffer against volatile expenses and inadequate wages; others blame cultural attitudes toward saving and status consumption.
  • FICO is criticized as opaque and profit‑oriented: more a measure of how lucrative and reliable you are as a debtor than of general financial health.
  • Some call for rent and other recurring obligations to be symmetrically reported (on‑time and late), others see that primarily as a landlord/collector weapon.

International and Structural Perspectives

  • Commenters from other countries describe systems that rely more on registries of income/debt and fewer behavioral “scores,” with tighter affordability rules.
  • Broad undercurrent: individual financial choices matter, but credit products, housing policy, and weak social safety nets strongly shape how and why people end up using BNPL in the first place.