Credit where it’s due: BNPL wants in on credit reports

The CFPB, “buy now, pay later” companies and credit bureaus all think BNPL data should be factored into credit scores. So what’s the hold up?

An illustration of a cauldron with a bubbling green liquid inside and green, running numbers "678." A stream of unidentifiable green stuff and a stream of unidentifiable red stuff are pouring into the cauldron and mixing.

Currently, most “buy now, pay later” products can only hurt a user’s credit, but major BNPL companies, consumer advocates and credit bureaus all say they're trying to change that.

Illustration: Christopher T. Fong/Protocol

Currently, most “buy now, pay later” products can only hurt a user’s credit — if there’s even an impact on their credit score at all. But major BNPL companies, consumer advocates and credit bureaus all say they are trying to change that.

The effort began to gain steam in June, when the CFPB urged “pay-in-four” BNPL companies, credit bureaus and scoring companies to work together on incorporating BNPL data into users’ credit scores in a way that rewards responsible behavior. But BNPL companies say they are hesitant to trust credit bureaus with the data.

Most BNPL companies today do not report data from their 0% APR, pay-in-four credit products to credit bureaus — that is, unless a customer is delinquent on their payments and the debt is sold to collections. Some companies claim to not report delinquencies either. (Affirm, which offers a distinct, longer-term product, reports some loan data to Experian.)

BNPL companies say they are hesitant to trust credit bureaus with users' data.

If firms reported BNPL user data to credit bureaus, it could hurt many users' credit scores. FICO Score 8 — still the most commonly used credit scoring algorithm — best responds to revolving lines of credit, while BNPL services are treated as something more akin to an installment loan. That means there’s a risk to BNPL customers’ credit scores based on their average age of credit and credit utilization percentage. BNPL customers tend to use the products an average of 3.8 times throughout the year, according to C+R Research. Additionally, users are approved for lines of credit matching individual purchases — essentially “maxing out” the credit line each time they choose pay-in-four at checkout. (Financial Technology Association, an industry group, disputes the characterization of BNPL as a “line of credit," arguing that implies users are approved for a credit line above the purchase price.)

When the data is not included in credit reports, it poses another risk: Lenders don’t know which BNPL products a customer is using. This may “impact both BNPL lenders and non-BNPL lenders seeking to understand how much debt a prospective borrower is carrying,” says the CFPB.

“We want to ensure that consumers can use this product to build credit — positive credit — and can show, demonstrate and believe that if they are individuals using this product responsibly, it will have a positive impact on their score,” Penny Lee, CEO of the Financial Technology Association, told Protocol. The group represents BNPL companies Klarna, Afterpay and Zip.

Consumer advocates, on that point, agree. Attorney Chi Chi Wu of the National Consumer Law Center recently argued in an op-ed that one solution may be for credit bureaus to evaluate BNPL as a revolving line of credit, like a credit card. But Wu told Protocol she feared BNPL companies may be hesitant to agree, because the companies don’t want to deal with regulations that apply to credit cards. These regulations include limitations on late fees, requirements for regular statements and — likely to be particularly troublesome for BNPL companies — chargeback rights.

BNPL companies say the credit card model just isn’t a good fit. “We don’t want to be subject to credit card regulation, because we’re not a credit card company,” Harris Qureshi, head of public policy and regulatory affairs at Afterpay, said in response to that argument.

Instead, Qureshi argues, there are key structural differences between pay-in-four BNPL products and credit cards. For example, payments are typically done on a bi-weekly basis, rather than monthly, and BNPL companies have their own set of protections against irresponsible use such as cutting off users after one missed payment, ostensibly preventing users from incurring as much debt as they could on a credit card.

In lieu of finding a uniform process for furnishing BNPL data to FICO and VantageScore to use in numerical credit scores, each of the main credit bureaus has designed an alternate process. BNPL companies are not required to submit their data to the bureaus by law. But if they do, the big three — which, notably, are in the business of aggregating and selling data — say they can use it. Experian, for example, has a separate “BNPL bureau,” where data is recorded but “stored separately” from users’ other credit data. Equifax says it will list BNPL trade lines in reports for lenders who want to see it, while TransUnion launched a “suite of solutions” that also allows for BNPL data to appear in a credit report without affecting a user’s score.

“We don’t want to be subject to credit card regulation, because we’re not a credit card company.”

BNPL companies say this is insufficient. “Ultimately what matters is that there’s a uniform approach, not just for the credit reporting, but for the end score as well,” said Qureshi.

The CFPB, meanwhile, is concerned about BNPL companies hoarding the data for anticompetitive reasons. “Super apps, BNPL, and embedded commerce all allow for data to be kept within the confines of the tech platform and deepen and secure consumer reliance on these products,” researchers Martin Kleinbard and Amy Zirkle said in a recent CFPB blog post.

BNPL companies, credit bureaus and the CFPB all have a shared interest: They all agree that BNPL products have potential as a credit-building tool. The products, when used responsibly, demonstrate a record of timely repayment and the foresight to budget.

But with data comes power. Both BNPL companies and credit bureaus want to be the arbiter of BNPL consumers’ data, leaving the parties at a stalemate. It may take action from the CFPB to break it.

Equifax and Experian declined to comment for this story. TransUnion did not respond to requests for comment.

A 'Soho house for techies': VCs place a bet on community

Contrary is the latest venture firm to experiment with building community spaces instead of offices.

Contrary NYC is meant to recreate being part of a members-only club where engineers and entrepreneurs can hang out together, have a space to work, and host events for people in tech.

Photo: Courtesy of Contrary

In the pre-pandemic times, Contrary’s network of venture scouts, founders and top technologists reflected the magnetic pull Silicon Valley had on the tech industry. About 80% were based in the Bay Area, with a smattering living elsewhere. Today, when Contrary asked where people in its network were living, the split had changed with 40% in the Bay Area and another 40% living in or planning to move to New York.

It’s totally bifurcated now, said Contrary’s founder Eric Tarczynski.

Keep Reading Show less
Biz Carson

Biz Carson ( @bizcarson) is a San Francisco-based reporter at Protocol, covering Silicon Valley with a focus on startups and venture capital. Previously, she reported for Forbes and was co-editor of Forbes Next Billion-Dollar Startups list. Before that, she worked for Business Insider, Gigaom, and Wired and started her career as a newspaper designer for Gannett.

Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.

Binance CEO wrestles with the 'Chinese company' label

Changpeng "CZ" Zhao, who leads crypto’s largest marketplace, is pushing back on attempts to link Binance to Beijing.

Despite Binance having to abandon its country of origin shortly after its founding, critics have portrayed the exchange as a tool of the Chinese government.

Photo: Akio Kon/Bloomberg via Getty Images

In crypto, he is known simply as CZ, head of one of the industry’s most dominant players.

It took only five years for Binance CEO and co-founder Changpeng Zhao to build his company, which launched in 2017, into the world’s biggest crypto exchange, with 90 million customers and roughly $76 billion in daily trading volume, outpacing the U.S. crypto powerhouse Coinbase.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at or via Google Voice at (925) 307-9342.


How I decided to leave the US and pursue a tech career in Europe

Melissa Di Donato moved to Europe to broaden her technology experience with a different market perspective. She planned to stay two years. Seventeen years later, she remains in London as CEO of Suse.

“It was a hard go for me in the beginning. I was entering inside of a company that had been very traditional in a sense.”

Photo: Suse

Click banner image for more How I decided seriesA native New Yorker, Melissa Di Donato made a life-changing decision back in 2005 when she packed up for Europe to further her career in technology. Then with IBM, she made London her new home base.

Today, Di Donato is CEO of Germany’s Suse, now a 30-year-old, open-source enterprise software company that specializes in Linux operating systems, container management, storage, and edge computing. As the company’s first female leader, she has led Suse through the coronavirus pandemic, a 2021 IPO on the Frankfurt Stock Exchange, and the acquisitions of Kubernetes management startup Rancher Labs and container security company NeuVector.

Keep Reading Show less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.


UiPath had a rocky few years. Rob Enslin wants to turn it around.

Protocol caught up with Enslin, named earlier this year as UiPath’s co-CEO, to discuss why he left Google Cloud, the untapped potential of robotic-process automation, and how he plans to lead alongside founder Daniel Dines.

Rob Enslin, UiPath's co-CEO, chats with Protocol about the company's future.

Photo: UiPath

UiPath has had a shaky history.

The company, which helps companies automate business processes, went public in 2021 at a valuation of more than $30 billion, but now the company’s market capitalization is only around $7 billion. To add insult to injury, UiPath laid off 5% of its staff in June and then lowered its full-year guidance for fiscal year 2023 just months later, tanking its stock by 15%.

Keep Reading Show less
Aisha Counts

Aisha Counts (@aishacounts) is a reporter at Protocol covering enterprise software. Formerly, she was a management consultant for EY. She's based in Los Angeles and can be reached at

Latest Stories