Not Now, Maybe Later: 2 Big BNPL Providers Opt-Out of Furnishing Data to FICO

COLUMBUS, Ohio— Two of the largest “buy now, pay later” providers, Klarna and Afterpay, say they will not share their lending data with FICO for use in credit scoring models, raising concerns among lenders about gaps in consumer debt reporting.

The decision comes after FICO announced plans to incorporate data from buy now, pay later (BNPL) loans into its credit scores to give lenders a fuller view of consumers’ installment debt. Affirm, a competing BNPL provider, has partnered with FICO to develop new credit models that include such data, The Wall Street Journal reported.

Affirm also began reporting its loan data to Experian and other credit bureaus earlier this year. Credit unions and other lenders have welcomed the change, saying it offers clearer insight into how leveraged a borrower may be, according to the report.

Klarna and Afterpay, however, pushed back, citing concerns that current credit scoring systems are not equipped to handle BNPL data accurately or fairly. The Journal said the companies have argued that inconsistent or delayed reporting could hurt consumers’ credit scores.

‘Strong Differentiator’

“A strong differentiator for BNPL products is to be a way for their customers to use a form of credit without having to necessarily rely on the stricter underwriting of a credit card,” Ben Danner, senior credit and commercial analyst at Javelin Strategy & Research, told the Journal. “This is built into the fabric of BNPL firms’ marketing strategies.”

Danner said both companies are concerned that legacy credit scoring models do not reflect the unique nature of BNPL loans and want assurances from FICO that including their data would not penalize customers.

Still, FICO’s own data suggests the impact on credit scores may be minimal. In its analysis of Affirm’s BNPL loans, more than 85% of consumers saw their scores change by roughly 10 points or less, according to the Journal analysis.

The Journal report noted Affirm also rejected the idea that BNPL lending creates significant “phantom debt” — unreported liabilities that don’t appear in traditional credit checks — noting that its loan volume remains small compared to credit card balances and that delinquencies are low.

Won’t Share Until…

Despite that, Afterpay said it will not share data with credit bureaus until it sees firm evidence that doing so would not harm its users’ credit profiles. Klarna, which is reportedly preparing for a public offering later this year, has taken a similar position, according to the Journal.

“If Klarna’s BNPL delinquency rate is below 1%, as they report, it is actually better performing than credit cards—so the impact of reporting does not seem as significant as one might think,” Danner told the Journal.. “But if FICO only includes positive behavior, it wouldn’t be objective.”

The report added that FICO has not publicly responded to the demands, but the standoff highlights the growing tension between fintech lenders and traditional credit scoring systems as BNPL services continue to gain traction among consumers.