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Buy now, pay later shopping options are very popular among consumers. According to the Federal Reserve, more than 75% of buy now, pay later (BNPL) users have a household income of less than $75,000. Many wallet-conscious consumers are also curious about whether this payment method is affecting their credit.
MarketWatch Professional Finance Reporter Venessa Wong joins Yahoo Finance to discuss how BNPL services impact consumer credit and the broader impact on consumer spending.
Wong explains that it has no impact on consumers’ credit scores: “Right now, it doesn’t reflect on your credit score. Experian (EXPN.L) “It’s a pay-at-later transaction, and those payments will be reflected on your credit report, but they won’t be reflected in your score at this time.” So for now, it won’t help or hurt you. If you don’t pay on time, the debt can snowball and cause other problems. ”
For more expert insights and the latest market trends, click here to watch the full episode of Yahoo Finance Live.
Editor’s note: This article was written by Nicholas Jacobino
video transcript
– Well, if you’re trying to monitor your finances, consumers may be underestimating how buy now, pay later services will affect your credit score. With that in mind, here’s a look at what providers report to the credit bureaus. It’s not the same across the industry.
MarketWatch reporter Venessa Wong is here to break it down for you. Thanks for joining us, Venessa. So, the reason I’m looking at your article here is because there seems to be some misconceptions regarding the impact of buy now, pay later services, whether they help or hurt your credit. is. Let’s break down some of it.
Venessa Wong: It’s really interesting. So there’s a new New York Fed report that says some consumers are turning to buy now, pay later services thinking it will help them build credit, but that’s not true right now. And that’s because Buy Now Pay Later providers typically don’t report your payment data to credit bureaus.
That’s contradictory. There are currently no standard rules on how this data should be handled. So I reached out to a buy now, pay later company. Khurana says he hasn’t reported anything to the credit bureaus. Afterpay also doesn’t report anything to the credit bureaus.
Affirm reports some data to credit bureaus, but not all credit bureaus. So right now, we’re still in a Motley-like situation in terms of how buy now, pay later data is handled. Specifically, a business reports monthly installments to his Experian, but his 4-payment plan payments, which split the total balance into 4 installments, do not report to any credit bureau.
If it goes to the credit bureaus, what to do about it is also not standard. So you can also explain a little bit about that if it makes sense. TransUnion says otherwise — TransUnion says otherwise —
– It won’t help your credit, but will it hurt your credit if you don’t pay them on time? Because that was always a bit of a worry as well. Where do you strike?
Venessa Wong: At this point, it will not be reflected in your credit score. In other words, Experian was saying, “If you make a buy now, pay later transaction, that payment will appear on your credit report.” However, it will not be reflected in your score at this time. So for now, it won’t help or hurt you. But if you don’t make your payments on time, the debt will snowball and create other problems.
– So, Venessa, from a financial education perspective on this, how much of that applies to some businesses? When people buy things that they’re interested in, especially when they pay interest like businesses depending on the amount they pay. How obvious are some of the things you offer? How much do people actually know about what they’re working on?
Venessa Wong: “Buy now, pay later” is still a relatively new service, so I think there’s still a lot of confusion about what’s going on. And I think that’s more of a problem because there are different payment plans, for example, monthly installment plans and his four-payment plan, and they report differently to the credit bureaus. Get confusing.
That’s why most people believe that using a credit card that has established standards for reporting to credit bureaus will help you build credit if you’re comfortable with the card and are actually making money from it. There are consumer advocates out there. On-time payments are a better option for people who want to build credit.
– Well, thank you for joining us to clarify some of that for us. I know a lot of people use it, even for something as small as groceries. Certainly, it’s important to see how those things add up and affect your credit. MarketWatch reporter Venessa Wong, thank you for joining us. Thank you very much.
Venessa Wong: thank you very much.
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