Credit reporting agency Equifax (NYSE: EFX) is set to begin recording "buy now, pay later" loans on credit reports. Equifax is set to start reporting these transactions early this year.
"Responsible lending benefits from a complete picture of a person's financial obligations," Equifax CEO Mark Begor commented.
"Buy now, pay later" loans are becoming increasingly popular with Millennial and Gen Z consumers. These loans, which often require only a cursory credit check, allow customers to immediately go on a small shopping trip, paying off the tab in 4 installments paid over the next month or so. Thrifty consumers often use these loans to buy mid-range items, such as home electronics, concert tickets, or an online shopping bill.
Major firms such as PayPal (NASDAQ: PYPL) have begun offering "buy now, pay later" services. A range of purpose-made apps have become popular as well, with firms such as the Australian company Afterpay (OTC: AFTPY) conducting billions of dollars of transactions.
These transactions, however, go largely unreported by credit monitoring firms.
Equifax and TransUnion (NYSE: TRU) have not recorded buy now, pay later transactions at the time of writing. Like Equifax, TransUnion is hoping to begin recording transactions this year. Experian (OTC: EXPGY) is currently working to provide reports with a small number of companies but plans to expand.
Buy now, pay later loans are most popular with consumers that lack an extensive credit history. It is believed that adding these short-term loans should help establish credit for many consumers. There is, however, a point of contention that loan providers are concerned with.
In regular credit reporting, the rapid opening and closing of accounts will typically warrant point deductions. Given that most loan terms are extremely short, buy now, pay later providers want to ensure that their customers won't be penalized.
Currently, Equifax plans to provide standard information on these short-term loans and appears to have taken this into consideration.