The BNPL Credit Score Revolution: Why Strategic Investments in Reporting-Ready Lenders Are Key to Long-Term Gains

The integration of Buy Now, Pay Later (BNPL) data into FICO credit scores—set to roll out this fall—marks a transformative shift in consumer finance. For investors, this move presents a unique opportunity to capitalize on a market poised to expand credit accessibility and reshape lending dynamics. FICO's decision to include BNPL data in its scoring models, particularly for the 90 million Americans expected to use BNPL services by 2025, could unlock significant value for BNPL lenders positioned to leverage this change. However, risks such as regulatory uncertainty and consumer overextension demand a selective investment approach. Let's dissect the opportunities, risks, and winners in this evolving landscape.

The Opportunity: Credit Inclusion Meets Financial Innovation

FICO's new models, FICO® Score 10 BNPL and FICO® Score 10 T BNPL, aim to capture the creditworthiness of consumers who rely on BNPL services—many of whom are younger or underbanked. By incorporating BNPL repayment data, FICO addresses a critical gap: 40% of U.S. consumers have thin credit files, lacking enough traditional credit history to secure loans. For these users, timely BNPL payments could now boost their scores, making them eligible for mortgages, auto loans, or small-business financing. This creates a virtuous cycle: more users gain access to BNPL services, driving adoption and revenue for providers.

The 2025 rollout is particularly timely. FICO's study found that BNPL users who manage multiple installment plans responsibly could see score improvements, while lenders using the new models gain a clearer picture of risk. For investors, this means BNPL firms with robust reporting partnerships—like Affirm and Sezzle—are well-positioned to capitalize on this shift.

Key Risks: Regulatory Hurdles and Consumer Overextension

While the opportunity is clear, risks loom large. First, regulatory uncertainty persists. The Consumer Financial Protection Bureau's (CFPB) suspension of its rule classifying BNPL as credit removes a layer of oversight, leaving providers without enforced requirements for transparency or dispute resolution. This could exacerbate “phantom debt” risks, where users accrue penalties from missed payments (24% of BNPL users missed payments in 2024, up from 18% in 2023).

Second, over-leverage remains a concern. BNPL's short-term, high-frequency loans could signal financial instability if users overuse these services. FICO's models aim to mitigate this by aggregating BNPL data to avoid penalizing frequent users, but lenders may still interpret these signals conservatively.

Finally, slow adoption of FICO's new models by lenders could delay the impact. Many institutions still rely on older FICO versions (e.g., FICO 8), which do not account for BNPL. Investors must assess which BNPL firms are partnering with credit bureaus to ensure their data is integrated into these models.

Investment Strategy: Focus on Reporting Partnerships

To navigate these risks, investors should prioritize BNPL lenders with proven reporting partnerships and robust credit-building tools. Here's why:

1. Affirm: The Pioneer with Credit Bureau Ties

Affirm's early moves to report all BNPL transactions to Experian (April 2024) and TransUnion (May 2024) give it a first-mover advantage. By 2025, its users' repayment histories will feed directly into FICO's new scoring models. This positions Affirm to attract price-sensitive, credit-building consumers—40% of whom are under 35, per its Q1 2025 data. Affirm's partnerships also provide a data edge over competitors, enabling it to refine risk assessment and underwriting.

2. Sezzle: The Credit-Building Specialist

Sezzle's “Sezzle Up” program allows users to opt-in to have their BNPL payments reported to all three major credit bureaus. This feature has driven a 20-point average score increase within four months for users with scores below 600. Unlike Klarna or Zip, which only report select products (e.g., Klarna's Term Loans), Sezzle's holistic approach aligns with FICO's goal of capturing full repayment behavior. Investors should watch for its expansion into markets with high underbanked populations.

3. Avoid Laggards: Klarna and Zip's Growing Challenges

While Klarna and Zip dominate BNPL's transaction volume, their reporting strategies lag. Klarna only began sharing Term Loan data with TransUnion in late 2024, excluding its popular “Pay in 4” plans. Zip, meanwhile, has no confirmed credit bureau partnerships. These gaps may limit their ability to benefit from FICO's new models, leaving them vulnerable to margin pressure as competitors gain a scoring advantage.

Conclusion: Selectivity is the Key to Profiting from BNPL's Evolution

FICO's inclusion of BNPL data is a watershed moment for financial inclusion—but not all BNPL lenders will thrive. Investors should focus on firms with credit bureau partnerships and data-driven risk management, such as Affirm and Sezzle. These companies stand to gain both market share (by attracting credit-building users) and valuation premiums as their data becomes a core input for FICO's models.

Meanwhile, avoid BNPL players reliant on transaction volume alone, as their lack of reporting infrastructure may leave them sidelined in this new credit paradigm. The BNPL revolution is here, but only the prepared will profit.

Investment Takeaway: Buy Affirm (AFRM) and Sezzle (pending IPO/stock availability) for their credit-building moats. Avoid Klarna (KLAR) and Zip (ZIP) until they secure broader reporting partnerships. Monitor FICO's adoption rate and regulatory developments closely.