Buy Now, Pay Later loans will factor in to Americans’ credit scores
Buy Now, Pay Later loans will factor in to Americans’ credit scores
How well — or how poorly — Americans are managing their Buy Now, Pay Later loans soon could be reflected in their credit scores.
Shocker: financial institutions want to know whether you have a good record of paying people back before deciding to lend you money
Is it really that simple? I once was stack in customer service hell with my internet provider where they weren't able to connect me but didn't want to cancel my service. I canceled the contract, they charged me some cancellation fees, I refused to pay, they sold my debt to a collector who was not able to collect anything but threatened that they will put me in some registry. Couple years later I was taking a mortgage and I asked in the bank if being in some registry could be an issue and they said that no, they don't care about unpaid $200 debt. With a generic credit score that's different. The bank will see a low score and might not care how did you get it. That gives leverage to debt collectors and shitty companies.
The "some registry" they put you in is probably made up. Credit reporting agencies don't just accept claims of debt or delinquent accounts from any random person who claims to be a debt collector. In many cases, if it isn't coming from a financial institution, they will need to see a court judgement before entering it on your credit report.
Surprised Pikachu face
But in all seriousness. Always looked at them as Middle Class version of payday loans. Never would have considered one but gosh darn… If things don’t improve I can see myself begrudgingly getting one for something I need.
On the whole, I agree. Usually wouldn't consider them.
However, a few years ago I bought a rather expensive item (several thousand dollars) and I was ready to just pay for it outright, but one of the payment options was 0% financing though one of these pay later companies with payments spread out over 4 years. So, I did that a put the money in a safe investment.
So I essentially got two discounts on the purchase. 1) the growth in the investment means I'm less out of pocket on the purchase, and 2) due to inflation, the dollars I'm using now to make payments are technically worth less than they were three years ago.
There's been a few times in my life that I've been able to take advantage of 0% financing for large purchases and I've never regretted it. But, for the strategy to work, you have to A) be willing and able to just buy the thing outright, without financing (the financing can't be a factor in your decision), and B) have the self control to not touch the invested money to make some other impulse buy.
ETA, another thing to watch out for is smoke and mirrors, where they claim 0% financing, but they've really just raised the price to cover what they would have made in interest charges, and then have a "discount for cash" type offer where you pay less if you don't finance. Usually better to not finance in those scenarios.
How is this news?