Credit reports are getting a couple of significant tweaks. Information from buy now, pay later (BNPL) firms will now be added to consumer credit reports from the three major credit bureaus—Equifax, Experian and TransUnion—and some medical debt information will be removed.
Consumers with medical debt should see their scores increase. Starting in July, medical debt that was sent to collection but eventually paid off will be removed from all three reports. Plus, any new medical debt you incur won’t show up on your credit reports until a year after it is sent to collection. Currently, credit reports start to show an unpaid medical account 180 days after it is sent to collection, and it can stay on your credit reports for up to seven years after you’ve paid off the debt.
BNPL firms, including Affirm, Klarna and Afterpay, offer you a loan at the checkout counter to cover your purchase. Until now, credit bureaus didn’t track such loans, and it’s not clear exactly how the BNPL information will factor into credit scoring formulas, says Matt Schulz, chief credit analyst at LendingTree, an online loan marketplace. People who pay their installment loans on time could see their scores go up, and tracking the loans may give some people a score who didn’t have one before.
However, if you miss payments or take out a lot of these short-term loans, the hit to both the payment history and credit history sides of the credit scoring algorithm could cause your score to drop, Schulz says. Payment history counts for 35% of your FICO score, with length of credit history counting for 15%. And if your BNPL loans boost your utilization ratio—how much of your available credit you are using—that could affect your score as well. If you plan on using a BNPL loan, it’s a good idea to set up automatic payments from your checking account or debit card to pay it off as soon as possible.
For more information on how to troubleshoot your credit reports, see How to Build Wealth (or Rebuild it.)
Rivan joined Kiplinger on Leap Day 2016 as a reporter for Kiplinger's Personal Finance magazine. A Michigan native, she graduated from the University of Michigan in 2014 and from there freelanced as a local copy editor and proofreader, and served as a research assistant to a local Detroit journalist. Her work has been featured in the Ann Arbor Observer and Sage Business Researcher. She is currently assistant editor, personal finance at The Washington Post.
Alaska Airlines to Buy Hawaiian: Get Bonus Miles Now
How to use the Alaska Airlines credit card and frequent flyer program to save on trips to Hawaii, Alaska and beyond.
By Ellen Kennedy Published
11 Reasons to Consider a 1031 Exchange
Deferring capital gains taxes might be at the top of the list, but growing your portfolio and your wealth and helping with estate planning are also compelling reasons.
By Daniel Goodwin Published
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
Five Ways to a Cheap Last-Minute Vacation
Travel Procrastinator? No matter. You can pull off a fun and memorable getaway on a moment's notice — without breaking the bank.
By Vaishali Varu Published
How Much Life Insurance Do You Need?
insurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life-insurance needs.
By Kimberly Lankford Published
TransUnion Fined $23M For Tenant Screening, Credit Freezes
Government charges TransUnion over illegal rental background checks and security freezes on consumer credit reports.
By Joey Solitro Published
When Is Amazon Prime Day?
Amazon Prime In 2023 Amazon had two Prime Day events — one in July and another, called Big Deal Days, in October. We expect 2024 to follow the same schedule.
By Bob Niedt Last updated
How to Shop for Life Insurance in 3 Easy Steps
insurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
By Kaitlin Pitsker Published
5 Ways to Shop for a Low Mortgage Rate
Becoming a Homeowner Rates are high this year, but you can still find an affordable loan.
By Daniel Bortz Published
Retirees, It's Not Too Late to Buy Life Insurance
life insurance Improvements in underwriting have made it easier to qualify for life insurance, which can be a useful estate-planning tool.
By David Rodeck Published