Using 'Buy Now, Pay Later' Will Soon Be on Your Credit Report
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Here's your money briefing for Thursday, December 23rd. I'm J.R. Whalen for The Wall Street Journal. When you did your holiday shopping this year, there's a decent chance you might have paid for the gifts with one of those buy now, pay later programs that lets you split the payment into smaller installments. Up till now, using those programs isn't something that would show up on your credit report, but that's about to change.
So the question with these companies is, will that frequent use or other elements of how our plans are set up potentially result in people who are being financially responsible and paying their bills with us on time having a negative impact on their credit score?
Anna Maria Andriotis covers the consumer credit market for us, including buy now, pay later programs. Coming up, we'll talk with her about how this change affecting buy now, pay later programs could affect your credit score. That's after the break.
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Buy now, pay later programs have become a popular option for consumers who want to spread out payments for small ticket items into more manageable installments.
What change is coming to credit reports regarding Buy Now, Pay Later programs?
But starting in January, using one of those plans could turn up on your credit report. Equifax, one of the big credit reporting firms, says it'll start keeping tabs on how customers use those so-called pay-in-for programs. Here to talk about it is WSJ reporter Anna Maria Andriotis. Anna Maria, thanks so much for being with us.
Great to be speaking with you.
So, Anna Maria, remind us what these Buy Now, Pay Later plans allow customers to do and how popular they've become.
These plans are available at merchants' checkout, often online, sometimes in stores. And essentially, they allow people to pay for the items that they're buying over time as opposed to paying for them in one shot. These plans are meant to resonate with people who don't have much in savings, don't have credit cards because they can't qualify for them, or have credit cards but don't want to use credit cards. And it's pitched to them as basically a way to make something that seems out of reach for them to buy more within reach to make it seem affordable. With this idea that, for example, oh, here's a $200 item that I otherwise would pass on, but... Because there's this buy now, pay later plan that lets me split up my payments into four even fixed payments every two weeks, all of a sudden $50 every two weeks seems much more manageable over the course of four biweekly payments as opposed to paying $200 in one shot.
And these programs are widely used and increasingly used by a growing number of people. Currently, what we have on an annual basis in the U.S. is that billions of dollars of these payment plans are being arranged on an annual basis. So a booming sector for sure.
Now, these programs have been around for a while. So why is Equifax deciding now to include customers' transactions on their credit reports?
So there are billions of dollars of payment obligations that are being extended to people from the buy now, pay later sector.
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