Buy now, pay later loans make it tough to get a handle on your credit

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Payment history often not reported

BNPL companies generally don’t report to the credit-scoring companies when consumers use these loans. That makes it a challenge for a lender to know how many loans a consumer has outstanding. 

“That makes a big difference in terms of how much you should loan,” said Kenneth Lin, CEO of fintech company Credit Karma. “Oftentimes, a credit system is actually blind to how much you owe in the Buy Now Pay Later scenario.”

Consumers with multiple BNPL loans with multiple payment dates may find themselves in a debt spiral. “That’s when people get into deep trouble,” Lin said.

Difficult to build credit history

The impact of late payments varies

Krisanapong Detraphiphat | Moment | Getty Images

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