Weston: How loans buy now, pay later could change creditworthiness

Like all easy loans, these plans can tempt people to overspend. Buy now, pay later loans are also largely unregulated and lack consumer protections covering credit and debit card purchases. In addition, the Consumer Financial Protection Bureau is investigating how buy-now, pay-later lenders use the payment and purchase data they collect from customers.

The credit bureaus are still working out the details

Credit bureaus want access to this payment data in hopes they can give more traditional lenders insight into how these borrowers are handling other types of credit.

Of course, the offices are not altruistic. They are private companies who want to profit. In doing so, however, the bureaus could help expand access to credit by identifying borrowers who are likely to handle credit among the millions of “invisibles” — people with no credit histories — as well as those who are under-informed Files for generating credit scores. TransUnion’s Pagel has called Buy Now, Pay Later Data the biggest financial inclusion opportunity in a generation.

How the offices will proceed is still a work in progress. Two of them, TransUnion and Experian, say the information won’t be included on regular credit reports for now, but lenders can request it. The third bureau, Equifax, says it will include the data in people’s credit reports.

But leading credit-scoring company FICO is still examining “buy now, pay later” data to see how well it can predict how people might handle other types of credit. There’s not even agreement between bureaus on whether the loans, like credit cards, should be treated as revolving debt or as installment loans, which typically have much longer terms.

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