Writer: Eric Bank
Editor: Lillian Guevara-Castro
Reviewer: Adam West
Key Takeaways
- Klarna and Afterpay stopped reporting most BNPL data to credit bureaus, so lenders can’t measure subprime borrower risk.
- Limited borrower transparency creates a competitive and regulatory disadvantage for subprime lenders to set loan prices.
- The absence of BNPL standard reporting slows down innovation in underwriting and prevents some consumers from establishing credit.
Klarna and Afterpay have stopped most reporting of buy now, pay later (BNPL) transactions to credit bureaus, The Wall Street Journal reported. The firms have held themselves back amid continuing discussion on how scoring models react to short-term, no-interest BNPL agreements.
Their hesitation comes at a time of rising BNPL usage, especially among consumers with limited credit history or low scores. Klarna still shares information about its longer-term loans, but its popular Pay-in-4 product remains off the record. Afterpay isn’t sharing any data at all.
This gap in data can distort credit decisions when demand for BNPL increases. Both companies feel that current score models don’t fully represent the risk profile of short-term, interest-free installment arrangements — paid on schedule, no less — and have cited uneven treatment among the bureaus.
But while Klarna and Afterpay wait, lenders — particularly those in the subprime segment — are left flying partially blind. Without a clear picture of BNPL repayment behavior, it’s hard to assess whether borrowers are managing debt responsibly or stockpiling obligations beyond control.
Subprime Lenders Kept in the Dark
Subprime lenders operate under tighter constraints than their prime peers. They commonly work within thinner margins, increased supervision, and elevated default risk. Omitting data on BNPL usage compels them to factor in additional caution — or turn down applicants — even when such caution may be unnecessary.
This approach limits access for qualified borrowers and pushes them toward more costly alternatives. Responsible use of BNPL — particularly by consumers seeking to establish or rebuild credit — should be transparent to gauge risk.
At the same time, legacy credit products like credit cards remain accessible to bureaus, giving users a more straightforward path to establishing credit. The exclusion of BNPL creates a structural mismatch that favors existing credit users over applicants with limited or nontraditional credit experience.
When the Credit File Goes Dark
Scoring firms are developing solutions to close the gap. Fair Isaac is designing scoring models — FICO® Score 10 BNPL and FICO® Score 10 T BNPL — to be delivered later this year to bundle BNPL accounts and increase predictiveness of the score. VantageScore has tried techniques to safely integrate BNPL data too.
But adoption comes slowly. Until newer models gain acceptance, lenders — particularly those operating in nonprime spaces — continue to be vulnerable to skewed signals.
Subprime lenders tend to use detailed data and behavioral cues to push approval levels without assuming excess risk. That detail goes missing without BNPL history.
The lack of credible BNPL data also stifles underwriting innovation. Most alternative and fintech lenders rely on nontraditional data points to optimize decisioning. But when large BNPL players withhold their loan performance, the ecosystem misses an essential feedback loop.
Regulatory issues also come into play. Uneven reporting makes it harder to demonstrate fair lending practices or meet regulatory requirements under laws like the Community Reinvestment Act — particularly in subprime-oriented portfolios.
More pressure may be necessary as policymakers and scoring firms push for standardization. But until that happens, subprime lenders must navigate the market with less-than-complete borrower profiles.
