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Can buy now, pay later hurt your credit score?

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2 years ago

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Wealth Enhancement Group Senior Vice President Nicole Webb discusses how investors can get started in the market, no matter their age, on ‘Making Money.’

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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Finance

Private Credit Expansion and Regulatory Oversight in 2026 Capital Markets

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5 days ago

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August 9, 2026

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The global private credit market has solidified its role as a fundamental pillar of enterprise finance, expanding rapidly across middle-market lending, asset-backed finance, and infrastructure financing. As non-bank financial institutions capture a larger share of corporate debt origination, global regulatory bodies are increasing oversight to evaluate market transparency and systemic risk interconnections.

Growth Drivers in Direct Lending
Direct lending platforms have continued to attract substantial institutional allocations from pension funds, sovereign wealth entities, and insurance companies seeking attractive risk-adjusted yields. Private debt funds offer corporate borrowers customized financing structures, faster execution timelines, and confidentiality compared to syndicated loan markets.

In 2026, private credit managers are increasingly financing larger corporate transactions, providing multi-billion-dollar credit facilities for buyout deals and corporate restructurings. The flexibility of private debt contracts—featuring unitranche pricing and tailored covenant packages—has made direct lending the preferred capital source for middle-market enterprise sponsors.

Regulatory Scrutiny and Systemic Risk Assessment
The rapid growth of non-bank intermediation has drawn heightened scrutiny from financial regulators in North America and Europe. Because private debt agreements are negotiated privately without public exchange disclosures, central banks are evaluating potential vulnerabilities related to asset valuation consistency and fund liquidity profiles.

Regulatory agencies are introducing guidelines aimed at improving reporting standards for private investment vehicles managing institutional assets. Key focus areas include monitoring leverage ratios within private credit funds and evaluating indirect credit exposures between commercial banking institutions and private debt funds.

Navigating Elevated Refinancing Costs
With benchmark interest rates remaining elevated, private debt borrowers face higher debt service obligations on floating-rate credit facilities. Financial advisory firms report an increase in proactive liability management strategies, including payment-in-kind (PIK) interest options, equity infusions from sponsors, and covenant modifications.

Private credit managers with deep operational capabilities are actively working alongside portfolio companies to optimize working capital and maintain cash flow coverage ratios during periods of higher borrowing costs.

Key Financial Takeaways
1. Mainstream Asset Class: Private credit has expanded beyond niche alternative asset status into a core corporate finance solution.
2. Enhanced Transparency Standards: Regulatory frameworks are evolving toward greater disclosure requirements for private debt managers.
3. Proactive Risk Management: Lenders and sponsors must prioritize debt sustainability and active portfolio monitoring amid high benchmark rates.

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Finance

Venture Capital and Startup Valuations in 2026: Focus on Unit Economics and Sustainable Growth

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1 week ago

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August 5, 2026

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The global venture capital (VC) ecosystem is operating under a disciplined investment framework in 2026. Following years of valuation adjustments and shifting liquidity environments, venture capital firms and private equity investors are prioritizing proven unit economics, positive cash flow pathways, and capital efficiency over rapid, unconstrained user acquisition.

The Shift Toward Disciplined Startup Valuations
Early-stage and growth-stage startup valuations have stabilized at sustainable historical averages. Venture capital partners are conducting rigorous due diligence processes before deploying capital, scrutinizing gross margins, customer acquisition costs (CAC), net revenue retention (NRR), and lifetime value (LTV) metrics.

While total capital deployed remains robust, seed and Series A funding rounds are taking longer to finalize. Founders are expected to demonstrate clear product-market fit and defensible intellectual property rather than relying on top-line revenue projections unsupported by strong underlying economics.

M&A Activity and Liquidity Solutions
The market for venture-backed exits is seeing renewed momentum through strategic mergers and acquisitions (M&A) and secondary market liquidity facilities. Established corporate enterprises are acquiring high-performing technology startups to integrate proprietary artificial intelligence models and specialized software solutions into their product ecosystems.

Simultaneously, secondary market transactions have become an essential liquidity mechanism for early employees and institutional investors. Specialized secondary funds are purchasing pre-IPO shares at discounted valuations, providing liquidity opportunities while companies remain private for longer durations.

Sector Allocation: Deep Tech, Clean Energy, and Enterprise Automation
Venture capital investment is heavily concentrated in deep technology and capital-intensive engineering sectors. High-growth investment themes include:
– Next-Generation Semiconductors: Hardware startups designing specialized AI processors and energy-efficient microchip architectures.
– Clean Technology: Battery chemistry innovations, carbon capture solutions, and grid-scale energy storage startups.
– Enterprise Process Automation: Software platforms that automate complex workflows in healthcare, financial services, and industrial logistics.

Key Insights for Entrepreneurs and Investors
1. Prioritize Capital Efficiency: Startups focused on achieving operational profitability receive higher valuation premiums from institutional investors.
2. Strategic Exit Planning: Corporate M&A is serving as a primary exit route for venture-backed startups navigating prolonged IPO windows.
3. Focus on High-Moat Technologies: Deep tech and proprietary software architectures are securing the majority of growth-stage capital allocations.

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Finance

The Evolution of Digital Payments: Cross-Border Settlement and Central Bank Digital Currencies in 2026

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1 week ago

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August 5, 2026

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The infrastructure supporting global commerce is undergoing a major technological upgrade as real-time digital payment rails, cross-border settlement solutions, and Central Bank Digital Currency (CBDC) pilot programs achieve widespread commercial adoption. Financial institutions and fintech developers are reimagining payment processing to eliminate friction, lower transaction fees, and accelerate settlement speed.

Transforming Cross-Border Settlement Infrastructure
For decades, international corporate payments relied on legacy correspondent banking networks characterized by multi-day settlement delays, opaque fee structures, and high foreign exchange markups. In 2026, modern cross-border payment networks are enabling near-instantaneous settlement for international trade transactions.

Financial technology platforms are leveraging distributed ledger technology and real-time gross settlement (RTGS) interconnections to settle transactions in seconds. International trade participants benefit from reduced working capital requirements and minimized foreign exchange volatility risks during cross-border transfers.

Commercial Expansion of Central Bank Digital Currencies
Central banks representing major global economies are advancing CBDC initiatives from research phases into active commercial deployment. Wholesale CBDCs—designed specifically for interbank settlement and financial institution clearing—are demonstrating substantial efficiency gains in domestic and international transactions.

At the retail level, several nations have introduced public digital currency options alongside existing commercial banking networks. These sovereign digital payment channels aim to expand financial inclusion, lower consumer transaction fees, and improve the efficiency of government-to-citizen financial disbursements.

Open Banking and Embedded Finance Ecosystems
Alongside settlement infrastructure upgrades, open banking regulations and embedded finance frameworks are transforming merchant-consumer interactions. Commercial businesses across retail, travel, and business-to-business (B2B) services are integrating seamless payment APIs directly into their customer software interfaces.

Through open banking frameworks, consumers can initiate secure bank-to-bank payments without relying on traditional credit card networks, significantly reducing merchant processing fees. Integrated Buy-Now-Pay-Later (BNPL) options and point-of-sale credit facilities continue to expand, driving higher conversion rates for digital commerce platforms.

Strategic Financial Takeaways
1. Treasury Optimization: Corporate treasurers should leverage instant cross-border payment platforms to minimize liquidity buffers and foreign exchange exposure.
2. CBDC Integration: Financial institutions must prepare internal core banking systems to interface with emerging wholesale CBDC payment rails.
3. Merchant Fee Reduction: Enterprise merchants can lower payment processing overhead by adopting account-to-account (A2A) open banking checkout solutions.

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