Apple Pay Later Reporting to Experian
Users of Apple’s AAPL, -0.66% buy-now-pay-later platform will soon have their payment history reported to one of the major credit bureaus, but it won’t affect their credit scores — at least not yet.
Incorporating Buy-Now-Pay-Later Data
The announcement marks the latest move by credit bureaus to gradually incorporate buy-now-pay-later data into their models as this type of debt becomes more popular.
Apple Pay Later Loan Information
Apple Pay Later, launched last March, allows users to pay off a purchase in four payments over six weeks. Starting March 1, Apple customers’ loan information will appear on their credit reports with Experian EXPN, -0.44%, one of the three major credit-reporting agencies.
Future Impact on Credit Scores
“While consumers will be able to see their Apple Pay Later loan information on their Experian credit report, the information won’t be factored into existing traditional credit scores but may in the future as new credit scoring models are developed,” according to the credit bureau.
Benefits for Consumers
Apple sending data to Experian could ultimately benefit consumers who make payments on time. “Apple’s move to send buy-now-pay-later loan information to Experian is a very positive first step,” Ed deHaan, a professor at the Stanford Graduate School of Business, mentioned.
Lack of Reporting from Other Platforms
So far, buy-now-pay-later loan information has mostly not shown up on credit reports. Affirm AFRM, -4.58% reports monthly installment data to Experian but does not report users’ “pay-in-four” history. Klarna and Afterpay SQ, +0.91% do not report payment data to the credit bureaus.
The Impact of Reporting in Buy-Now-Pay-Later Services
The lack of reporting in buy-now-pay-later services poses risks for vulnerable users, potentially leading to the accumulation of debts across multiple providers – a phenomenon known as the phantom debt problem. Without consistent reporting to credit agencies, the financial health of buy-now-pay-later users remains unclear.
Missed Opportunities for Responsible Users
Despite making timely payments, financially stable individuals using buy-now-pay-later services do not receive credit for managing their loans responsibly. There is a common misconception that these services can help build credit, but the lack of reported payment histories to credit bureaus refutes this belief.
Advocating for Change
Consumer Reports believes that the recent decision by Apple to report buy-now-pay-later activity is a positive step forward and encourages other providers to follow suit. Jennifer Bailey, VP of Apple Pay and Apple Wallet, emphasizes the goal of promoting transparency and responsible lending to help users build their credit.
The Evolving Lending Industry
TransUnion reveals that the lending industry is moving swiftly towards reporting buy-now-pay-later data to credit bureaus. However, it remains crucial for credit bureaus to determine how to incorporate this information into credit scores effectively.
The Need for Meaningful Data Integration
DeHaan highlights the importance of credit bureaus incorporating buy-now-pay-later data in a meaningful way, emphasizing the significance of understanding users’ creditworthiness based on their payment histories. Apple Pay Later users, known for their higher incomes and financial literacy, present unique challenges in building accurate credit models.
Positive Trends in Credit Scores
J.D. Power studies indicate that Apple Pay Later customers often possess higher credit scores compared to other buy-now-pay-later users, with 27% holding excellent scores exceeding 720. With Experian now receiving loan data, there is potential for incorporating this information into credit scores and lending models.