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Can buy now, pay later hurt your credit score?

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You’ve probably noticed that when you’re shopping online or sometimes in a retail store, you can select a buy now, pay later (BNPL) option, which is a type of installment loan that generally allows a consumer to buy something at the point of purchase with little or no initial payment and then pay off the balance over multiple payments.

According to the Consumer Financial Protection Bureau, one common repayment plan allows you to split the cost of the product into four interest-free biweekly payments, with the first payment due at checkout or in two weeks.

How do BNPL services work?

Buy now, pay later, as the name implies, is a form of installment lending. Providers include Affirm, Afterpay and Klarna.

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“A common flavor is four interest-free payments over six weeks, but sometimes these plans last for longer (e.g., six months, 12 months, sometimes even 24+ months) with or without interest,” said Ted Rossman, senior industry analyst at Bankrate.com. “A key difference between buy now, pay later and credit cards is that buy now, pay later plans are split into pre-determined installments. Users know exactly how much they owe and for exactly how long.”

Does BNPL require a hard inquiry into a person’s credit history?

According to Rossman, BNPL lenders usually only do a soft inquiry, which doesn’t affect a consumer’s credit score. These plans tend to be easier to qualify for than credit cards and other loans or lines of credit, he said.

How could BNPL affect your credit?

The credit scoring industry doesn’t really know what to do with BNPL, said Rossman.

“It’s a newer form of lending that doesn’t fit neatly into the way things were done previously,” he said.

Credit score on smartphone

Buy now, pay later, as the name implies, is a form of installment lending. Providers include Affirm, Afterpay and Klarna. (iStock)

To date, said Rossman, given these challenges and also difficulty obtaining BNPL information from providers, most BNPL plans don’t appear on consumers’ credit reports. There are some new developments on that front, however.

“Apple Pay Later has started reporting to Experian, and Affirm reports some of its longer-term plans to Experian, but most BNPL plans are not recorded on Americans’ credit reports,” said Rossman.

One exception, he outlined, is when users fall so far behind (often 90+ days) that they get sent to collections.

“A collections agency report could be a significant credit scoring blemish, even if these BNPL plans don’t always report routine payment activity,” Rossman added.

What will credit bureaus, such as Experian, track?

Rod Griffin, senior director of consumer education and advocacy at Experian told FOX Business that when a BNPL loan is reported to Experian, it will appear on the consumer’s view of the credit report similarly to other loans, but will include a buy now, pay later designation.

“The credit report will include the original balance, monthly payment and terms of the BNPL loan,” Griffin said.

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Furthermore, Griffin said that at this time, while BNPL information will be included on a consumer’s Experian credit report if it is reported to Experian, it will not factor BNPL data into existing traditional credit scores, but may in the future as new credit scoring models are developed.

Can BNPL services help you build credit?

Griffin said the future of BNPL and how it intersects with your creditworthiness could expand.

An individual using a credit card reader

A common repayment plan allows you to split the cost of the product into four interest-free biweekly payments, with the first payment due at checkout or in two weeks. (Robert Nickelsberg/Getty Images / Getty Images)

“As BNPL information is more widely reported to Experian, lenders will have greater visibility into BNPL histories,” Griffin said. “If you use BNPL loans responsibly, don’t take on more debt than you can manage, and make all your payments on time, your BNPL payment history could enable you to qualify for new credit and other forms of credit in the future.”

What are some potential downsides to BNPL practices?

Overspending can be a concern, experts have cautioned. “I think it’s easy to trick yourself into overdoing it with BNPL, because it may not even feel like debt,” Rossman said. “It’s not a $200 purchase, right? It’s just four easy payments of 50 bucks. Or so the thinking goes.”

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To that point, such plans are often embedded into retailers’ websites and can encourage impulse buying.

“Especially if you have multiple plans running at the same time, you might spend more than you intended. It’s also easy to lose track of the frequent payment schedule,” Rossman said.

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The Fed is stuck in neutral as it watches how Trump’s policies play out

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U.S. Federal Reserve Chair Jerome Powell testifies before a Senate Banking, Housing and Urban Affairs Committee hearing on “The Semiannual Monetary Policy Report to the Congress,” at Capitol Hill in Washington, U.S., Feb. 11, 2025. 

Craig Hudson | Reuters

The popular narrative among Federal Reserve policymakers these days is that policy is “well-positioned” to adjust to any upside or downside risks ahead. However, it might be more accurate to say that policy is stuck in position.

With an abundance of unknowns swirling through the economy and the halls of Washington, the only gear the central bank really can be in these days is neutral as it begins what could be a long wait for certainty on what’s actually ahead.

“In recent weeks, we’ve heard not only enthusiasm — particularly from banks, about possible shifts in tax and regulatory policies — but also widespread apprehension about future trade and immigration policy,” Atlanta Fed President Raphael Bostic said in a blog post. “These crosscurrents inject still more complexity into policymaking.”

Bostic’s comments came during an active week for what is known on Wall Street as “Fedspeak,” or the chatter that happens between policy meetings from Chair Jerome Powell, central bank governors and regional presidents.

Officials who have spoken frequently described policy as “well-positioned” — the language is now a staple of post-meeting statements. But increasingly, they are expressing caution about the volatility coming from President Donald Trump’s aggressive trade and economic agenda, as well as other factors that could influence policy.

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“Uncertainty” is an increasingly common theme. In fact, Bostic titled his Thursday blog post “Uncertainty Calls for Caution, Humility in Policymaking.” A day earlier, the rate-setting Federal Open Market Committee released minutes from the Jan. 28-29 meeting, with a dozen references to the uncertain climate in the document.

The minutes specifically cited “elevated uncertainty regarding the scope, timing, and potential economic effects of possible changes to trade, immigration, fiscal, and regulatory policies.”

Uncertainty factors into the Fed’s decision making in two ways: the impact that it has on the employment picture, which has been relatively stable, and inflation, which has been easing but could rise again as consumers and business leaders get spooked about the impact tariffs could have on prices.

Missing the target

The Fed targets inflation at 2%, a goal that has remained elusive for going on four years.

“Right now, I see the risks of inflation staying above target as skewed to the upside,” St. Louis Fed President Alberto Musalem told reporters Thursday. “My baseline scenario is one where inflation continues to converge towards 2%, providing monetary policy remains modestly restrictive, and that will take time. I think there is a potential for inflation to remain high and activity to slow. … That’s an alternative scenario, not a baseline scenario, but I’m attentive to it.”

The operative in Musalem’s comment is that policy holds at “modestly restrictive,” which is where he considers the current level of the fed funds rate between 4.25%-4.5%. Bostic was a little less explicit on feeling the need to keep rates on hold, but emphasized that “this is no time for complacency” and noted that “additional threats to price stability may emerge.”

Chicago Federal Reserve President Austan Goolsbee, thought to be among the least hawkish FOMC members when it comes to inflation, was more measured in his assessment of tariffs and did not offer commentary in separate appearances, including one on CNBC, on where he thinks rates should go.

“If you’re just thinking about tariffs, it depends how many countries are they going to apply to, and how big are they going to be, and the more it looks like a Covid-sized shock, the more nervous you should be,” Goolsbee said.

Many risks ahead

More broadly, though, the January minutes indicated a Fed highly attuned to potential shocks and not interested in testing the waters with any further interest rate moves. The meeting summary pointedly noted that committee members want “further progress on inflation before making additional adjustments to the target range for the federal funds rate.”

There’s also more than just tariffs and inflation to worry about.

The minutes characterized the risks to financial stability as “notable,” specifically in the area of leverage and the level of long-duration debt that banks are holding.

Prominent economist Mark Zandi — not normally an alarmist — said in a panel discussion presented by the Peter G. Peterson Foundation that he worries about dangers to the $46.2 trillion U.S. bond market.

“In my view, the biggest risk is that we see a major sell off in the bond market,” said Zandi, the chief economist at Moody’s Analytics. “The bond market feels incredibly fragile to me. The plumbing is broken. The primary dealers aren’t keeping up with the amount of debt outstanding.”

“There’s just so many things coming together that I think there’s a very significant threat that at some point over the next 12 months, we see a major sell-off in the bond market,” he added.

In this climate, he said, there’s scant chance for the Fed to cut rates — though markets are pricing in the potential for a half percentage point in reductions by the end of the year.

That’s wishful thinking considering tariffs and other intangibles hanging over the Fed’s head, Zandi said.

“I just don’t see the Fed cutting interest rates here until you get a better feel about inflation coming back to target,” he said. “The economy came into 2025 in a pretty good spot. Feels like it’s performing well. Should be able to weather a lot of storms. But it feels like there’s a lot of storms coming.”

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Alibaba rose on China AI hopes. Where analysts see the stock heading

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Walmart sell-off bizarre, buy stock despite tariff risks: Bill Simon

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Walmart's stock drop after earnings is bizarre, says former CEO Bill Simon

Walmart stock may be a steal.

Former Walmart U.S. CEO Bill Simon contends the retailer’s stock sell-off tied to a slowing profit growth forecast and tariff fears is creating a major opportunity for investors.

“I absolutely thought their guidance was pretty strong given the fact that… nobody knows what’s going to happen with tariffs,” he told CNBC’s “Fast Money” on Thursday, the day Walmart reported fiscal fourth-quarter results.

But even if U.S. tariffs against Canada and Mexico move forward, Simon predicts “nothing” should happen to Walmart.

“Ultimately, the consumer decides whether there’s a tariff or not,” said Simon. “There’s a tariff on avocados from Mexico. Do you have guacamole with your chips or do you have salsa and queso where there is no tariff?”

Plus, Simon, who’s now on the Darden Restaurants board and is the chairman at Hanesbrands, sees Walmart as a nimble retailer.

“The big guys, Walmart, Costco, Target, Amazon… have the supply and the sourcing capability to mitigate tariffs by redirecting the product – bringing it in from different places [and] developing their own private labels,” said Simon. “Those guys will figure out tariffs.”

Walmart shares just saw their worst weekly performance since May 2022 — tumbling almost 9%. The stock price fell more than 6% on its earnings day alone. It was the stock’s worst daily performance since November 2023.

Simon thinks the sell-off is bizarre.

“I thought if you hit your numbers and did well and beat your earnings, things would usually go well for you in the market. But little do we know. You got to have some magic dust,” he said. “I don’t know how you could have done much better for the quarter.”

It’s a departure from his stance last May on “Fast Money” when he warned affluent consumers were creating a “bubble” at Walmart. It came with Walmart shares hitting record highs. He noted historical trends pointed to an eventual shift back to service from convenience and price.

But now Simon thinks the economic and geopolitical backdrop is so unprecedented, higher-income consumers may shop at Walmart permanently.

“If you liked that story yesterday before the earnings release, you should love it today because it’s… cheaper,” said Simon.

Walmart stock is now down 10% from its all-time high hit on Feb. 14. However, it’s still up about 64% over the past 52 weeks.

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