Credit reporting agency Equifax to include buy now, pay later transactions in its reports

US firm can now persuade major BNPL providers, including Afterpay and Klarna, to begin reporting consumer data to company

Credit cards, a chain and an open padlock is seen in front of displayed Equifax logo in this illustration taken September 8, 2017. REUTERS/Dado Ruvic/Illutration

The US consumer credit reporting agency Equifax will begin including in its credit reports those purchases that allow users of popular apps to pay off big items over time.

The Atlanta-based firm will become the first major credit-reporting company to make the move, a statement released on Monday said.

Equifax now has the task of persuading major buy-now-pay-later (BNPL) providers – firms such as Afterpay and Klarna – to begin reporting their consumers’ data to the company.

“Most BNPL providers either bypass the credit check completely or do a soft pull on credit files, which can be attractive to consumers,” Mark Luber, chief product officer for Equifax’s US information-solutions division, said in the statement.

“We are encouraging BNPL providers to report into Equifax as a powerful source of data. Those who use BNPL services that report can demonstrate reliable behaviour and boost their credit profile.”

Starting in the first quarter of next year, Equifax will create a new “business industry code” to classify loans reported by buy-now-pay-later providers. Banks and other users of Equifax’s data will then be able to decide how to use that information in their underwriting.

Consumers have flocked to buy-now-pay-later providers and are expected to spend a whopping $100 billion using such services this year alone.

Equifax’s move comes as the industry faces fresh regulatory scrutiny from the Consumer Financial Protection Bureau, which last week opened an inquiry into major players in the space.

The agency has previously warned customers about the fact that most lenders in the space do not report payments to major credit-reporting companies.

“Your credit scores won’t be helped or hurt by getting a BNPL loan or by whether or not you make your payments on time,” the agency said this month.

“However, if you don’t repay your BNPL loan and it’s turned over to a debt collector, it could be reported to a credit-reporting company, which can hurt your credit scores.”

A recent study by Equifax found that a majority of consumers were helped by having an on-time, buy-now-pay-later trade line in their credit file. Those consumers’ credit scores increased by 13 points, on average.

Updated: December 21st 2021, 5:00 AM