Affirm’s Credit Reporting Expansion with TransUnion: A Strategic Move to Boost Consumer Trust and Market Share
3min read Affirm Holdings, Inc. (NASDAQ: AFFM) has taken a bold step in its mission to redefine consumer finance by expanding its partnership with TransUnion, one of the three major U.S. credit bureaus. Effective May 1, 2025, all Affirm “pay-over-time” loans—ranging from its signature “Pay in 4” short-term plans to longer-term installment loans—will be reported to TransUnion credit files. This move aims to enhance transparency, empower consumers, and position Affirm as a leader in the $150 billion buy now, pay later (BNPL) market. But what does this mean for investors? Let’s dissect the implications.
Key Details of the Partnership
The agreement marks a critical milestone for Affirm. Starting May 1, 2025, every loan issued through Affirm’s platform—whether a 14-day interest-free installment or a multi-month plan—will appear on consumers’ TransUnion credit reports. While the data won’t immediately impact traditional credit scores (e.g., FICO or VantageScore), it lays the groundwork for future integration into scoring models. This is a strategic play to address a key consumer pain point: 40% of non-BNPL users say they’d adopt the service if it helped build credit histories, and 53% of that group are more likely to use BNPL if it positively impacts their scores, according to TransUnion research.
For Affirm, this creates a dual advantage: attracting new users and deepening loyalty among existing ones. The move also aligns with CEO Libor Michalek’s vision of “honest financial products” that avoid hidden fees, positioning Affirm as a responsible alternative to traditional credit.
Why Credit Reporting Matters for BNPL
The BNPL sector has long faced skepticism over its impact on credit visibility. Unlike credit cards, BNPL transactions were historically excluded from credit reports, leaving users with no formal record of timely payments. This made it harder for younger or underbanked consumers to build credit histories. Affirm’s partnership addresses this gap, potentially unlocking a broader customer base.
Competitive Landscape and Challenges
Affirm’s move contrasts sharply with rivals like Klarna, which has resisted reporting to U.S. bureaus. Klarna’s stance stems from concerns that BNPL data might be misinterpreted by existing scoring models, which are designed for revolving credit like credit cards. For instance, frequent small loans could erroneously signal financial instability. Affirm, however, is gambling that standardized reporting—alongside evolving credit models—will mitigate such risks.
The company’s commitment to collaboration is evident: it’s working with TransUnion and other stakeholders to establish industry-wide reporting standards. This could give Affirm a leg up as BNPL reporting becomes mainstream.
Risks and Considerations for Investors
While the partnership is a positive step, risks remain. First, the lack of retroactive reporting for loans issued before May 1, 2025, limits its immediate impact. Second, BNPL’s inclusion in credit scores may not occur quickly. TransUnion’s Steve Chaouki noted that lenders will only see this data “as more providers adopt similar practices,” implying a wait-and-see approach from competitors.
Furthermore, there’s a consumer risk: BNPL usage could backfire if overused. Chi Chi Wu of the National Consumer Law Center warns that frequent installment loans might flag users as financially stretched, even if payments are timely. This underscores the need for scoring models that distinguish responsible BNPL users from those in financial distress.
The Bottom Line: A Win for Affirm’s Long-Term Growth
Despite the hurdles, Affirm’s partnership with TransUnion is a strategic win. By aligning with a major credit bureau, Affirm not only enhances its appeal to credit-invisible consumers but also signals its commitment to industry legitimacy. With BNPL adoption poised to grow—and TransUnion’s data showing rising consumer demand tied to credit-building benefits—this move could solidify Affirm’s market leadership.
Investors should watch for two key metrics: Affirm’s user growth post-May 2025 and the timeline for BNPL inclusion in credit scores. If the latter accelerates, Affirm’s valuation could rise sharply, given its first-mover advantage. Meanwhile, the stock’s recent outperformance—up 25% year-to-date against a flat S&P 500—suggests markets already see this as a positive catalyst.
In conclusion, Affirm’s credit reporting expansion is a bold bet on the future of financial transparency. By tackling a core consumer concern head-on, Affirm isn’t just capturing market share—it’s redefining what responsible finance looks like. For investors, this is a signal to stay long-term bullish, provided the company continues to navigate the regulatory and competitive complexities ahead.
