FICO and Affirm analyse the impact of BNPL loans on credit scores

Conducted in collaboration with Affirm, the study analysed how BNPL data might influence FICO Scores when reported to credit bureaus. 

The 12-month study reviewed credit data from over 500,000 consumers who had taken out at least one Affirm BNPL loan and compared their credit scores to those without such loans. FICO simulated the impact of incorporating these loans into consumer credit files to assess potential changes in credit scores.

Findings on BNPL and credit scoring 

The research aimed to evaluate how BNPL loans affect FICO Scores and to inform appropriate methods for reporting and integrating this data into credit assessments. The study led to the development of a proprietary approach for incorporating BNPL data, which, in some cases, resulted in improved credit scores for borrowers while maintaining predictive accuracy for lenders. 

Officials from FICO noted that the increasing use of BNPL loans makes it important to understand their influence on credit scores. They stated that integrating BNPL data into FICO Scores could benefit certain consumers while also helping lenders improve risk assessment. 

One characteristic of BNPL loans is the potential for consumers to open multiple accounts in a short period. To address this, FICO developed a method that aggregates BNPL loans when calculating credit score variables. This approach was found to improve predictive accuracy while mitigating potential negative impacts on scores.

Main insights

The study's findings showed: 

• 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 Affirm 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. 

FICO plans to introduce a solution based on the study's findings to incorporate BNPL data into credit scoring models. Further details on this initiative are expected to be released soon.