FICO is introducing two credit scores that incorporate buy-now, pay-later data, underscoring how significant a part of the consumer credit landscape the popular and controversial installment plans have become.

The company will offer the products — FICO Score 10 BNPL and FICO Score 10 T BNPL — later this year, it said in a statement Monday. The scores will help lenders make more accurate decisions about consumer creditworthiness, especially for those who borrow for the first time using the payment plans, FICO said.

Buy-now, pay-later platforms, which allow consumers to split purchases into smaller installments, surged in popularity during the pandemic and have stuck around ever since.

— Bloomberg

That growth has sparked concerns consumers may be making purchases they can’t afford. It’s also raised the specter of “phantom debt” — a murky picture of consumer indebtedness — because the major BNPL providers had typically shied away from sharing their data with credit agencies, arguing it would ding consumers’ ratings.

“Buy-now, pay-later loans are playing an increasingly important role in consumers’ financial lives,” said Julie May, vice president and general manager of B2B scores at FICO. “By capturing a broader view of consumer credit behavior, lenders believe they can make more informed decisions, ultimately benefiting both the industry and consumers.”

Affirm Holdings Inc. said in March that it will provide data on its pay-over-time loans to credit-reporting company Experian Plc. Although the new loan reporting won’t initially be factored into consumers’ traditional credit scores, future scoring models could include the data, the two firms said at the time.

FICO developed the scores — which will be offered alongside existing versions — after seeking input from some of the largest US lenders, it said in its statement. FICO said it’s the first major credit score provider to include BNPL data in its products.

The credit-rating company also cited its recent study examining the impact of installment loans on credit scores. That research found most consumers who had recently obtained five or more BNPL loans from Affirm showed either higher scores or no score changes.

There may be signs the products are causing strains. An annual survey by the Federal Reserve published in May found the share of people falling behind on buy now, pay later programs “increased sharply” last year. Nearly 25% of people were late in making a payment lin 2024, compared with 18% in 2023, according to the central bank’s survey of household economics and decision making.