FICO and Affirm published findings from a study examining the effect of including BNPL loans on consumer credit scores. The 12-month study reviewed credit data from over 500k consumers who had taken out at least one Affirm loan and compared their credit scores to those without loans.
Here's what it found:
- For over 85% of participants, the inclusion of BNPL data led to FICO Score changes of less than 10 points, similar to the effects of opening a new account.
- Consumers who had taken out five or more BNPL loans saw either no change or an increase in their credit scores.
- Across various scenarios, the inclusion of BNPL data improved or had no negative impact on credit score predictiveness.
As a result of the study, FICO says it is now developing a way to introduce its proprietary treatment of BNPL data to the credit-scoring marketplace.
I'll be curious to learn in the future if / how Affirm and other BNPL providers build FICO's data into their loan underwriting process, which historically has not performed hard credit checks before issuing loans to consumers. Is FICO developing a two-way street with BNPL providers to share data on consumers? Or will BNPL providers continue to ignore credit scores for their own lending purposes, while simultaneously impacting users' credit scores when it comes to obtaining traditional loans? Answers to those questions and more TBD.