FICO and Affirm Unveil Industry-Leading Analysis of ‘Buy Now, Pay Later’ Loans
FICO and Affirm have released findings from a groundbreaking 12-month study analyzing the impact of including 'Buy Now, Pay Later' (BNPL) loans in FICO® Scores. The research, which examined over 500,000 consumers with Affirm BNPL loans, revealed that FICO's innovative treatment of BNPL data can lead to score improvements for some borrowers while enhancing model performance.
Key findings show that for over 85% of consumers, score impacts were within +/- 10 points. Notably, consumers with five or more Affirm BNPL loans experienced higher scores or no changes. FICO developed a proprietary approach that aggregates multiple BNPL loans when calculating certain variables, effectively capturing predictive signals while potentially increasing scores for some BNPL users.
Based on these results, FICO is developing a solution to implement its proprietary treatment of BNPL data in the credit-scoring marketplace.
FICO e Affirm hanno pubblicato i risultati di uno studio innovativo della durata di 12 mesi che analizza l'impatto dell'inclusione dei prestiti 'Compra ora, paga dopo' (BNPL) nei punteggi FICO®. La ricerca, che ha esaminato oltre 500.000 consumatori con prestiti BNPL di Affirm, ha rivelato che il trattamento innovativo di FICO dei dati BNPL può portare a miglioramenti del punteggio per alcuni mutuatari, mentre migliora le prestazioni del modello.
I risultati principali mostrano che per oltre l'85% dei consumatori, gli impatti sui punteggi erano entro +/- 10 punti. In particolare, i consumatori con cinque o più prestiti BNPL di Affirm hanno registrato punteggi più elevati o nessuna variazione. FICO ha sviluppato un approccio proprietario che aggrega più prestiti BNPL nel calcolo di certe variabili, catturando efficacemente segnali predittivi e aumentando potenzialmente i punteggi per alcuni utenti BNPL.
In base a questi risultati, FICO sta sviluppando una soluzione per implementare il suo trattamento proprietario dei dati BNPL nel mercato della valutazione del credito.
FICO y Affirm han publicado los resultados de un estudio innovador de 12 meses que analiza el impacto de incluir préstamos 'Compra ahora, paga después' (BNPL) en los puntajes FICO®. La investigación, que examinó a más de 500,000 consumidores con préstamos BNPL de Affirm, reveló que el tratamiento innovador de FICO de los datos BNPL puede llevar a mejoras en el puntaje para algunos prestatarios, al mismo tiempo que mejora el rendimiento del modelo.
Los hallazgos clave muestran que para más del 85% de los consumidores, los impactos en los puntajes estaban dentro de +/- 10 puntos. Notablemente, los consumidores con cinco o más préstamos BNPL de Affirm experimentaron puntajes más altos o ningún cambio. FICO desarrolló un enfoque propietario que agrega múltiples préstamos BNPL al calcular ciertas variables, capturando señales predictivas de manera efectiva y aumentando potencialmente los puntajes de algunos usuarios de BNPL.
Basado en estos resultados, FICO está desarrollando una solución para implementar su tratamiento propietario de los datos BNPL en el mercado de puntajes de crédito.
FICO와 Affirm은 지금 구매하고 나중에 지불하기 (BNPL) 대출을 FICO® 스코어에 포함하는 것의 영향을 분석한 12개월간의 획기적인 연구 결과를 발표했습니다. Affirm BNPL 대출을 받은 500,000명 이상의 소비자를 조사한 이 연구는 BNPL 데이터에 대한 FICO의 혁신적인 처리가 일부 차용자의 점수를 향상시키고 모델 성능을 개선할 수 있음을 보여주었습니다.
주요 발견에 따르면, 85% 이상의 소비자에서 점수 영향은 +/- 10점 이내였습니다. 특히, 다섯 개 이상의 Affirm BNPL 대출을 가진 소비자는 더 높은 점수를 기록하거나 변화가 없었습니다. FICO는 특정 변수를 계산할 때 여러 BNPL 대출을 집계하는 독점적 접근 방식을 개발하여 효과적으로 예측 신호를 포착하고 일부 BNPL 사용자에게 점수를 잠재적으로 증가시킵니다.
이 결과를 바탕으로 FICO는 신용 평가 시장에서 BNPL 데이터의 독점적 처리를 구현하기 위한 솔루션을 개발하고 있습니다.
FICO et Affirm ont publié les résultats d'une étude révolutionnaire de 12 mois analysant l'impact de l'inclusion des prêts 'Achetez maintenant, payez plus tard' (BNPL) dans les scores FICO®. La recherche, qui a examiné plus de 500 000 consommateurs ayant des prêts BNPL d'Affirm, a révélé que le traitement innovant des données BNPL par FICO pouvait entraîner des améliorations de score pour certains emprunteurs tout en améliorant les performances du modèle.
Les résultats clés montrent que pour plus de 85 % des consommateurs, les impacts sur les scores étaient dans une fourchette de +/- 10 points. Notamment, les consommateurs avec cinq prêts BNPL d'Affirm ou plus ont enregistré des scores plus élevés ou aucune variation. FICO a développé une approche propriétaire qui agrège plusieurs prêts BNPL lors du calcul de certaines variables, capturant efficacement des signaux prédictifs tout en augmentant potentiellement les scores pour certains utilisateurs de BNPL.
Sur la base de ces résultats, FICO développe une solution pour mettre en œuvre son traitement propriétaire des données BNPL sur le marché de la notation de crédit.
FICO und Affirm haben die Ergebnisse einer bahnbrechenden 12-monatigen Studie veröffentlicht, die die Auswirkungen der Einbeziehung von 'Jetzt kaufen, später bezahlen' (BNPL) Krediten in die FICO® Scores analysiert. Die Forschung, die über 500.000 Verbraucher mit Affirm BNPL-Krediten untersuchte, zeigte, dass die innovative Behandlung von BNPL-Daten durch FICO zu Punktverbesserungen für einige Kreditnehmer führen kann, während die Modellleistung verbessert wird.
Wichtige Ergebnisse zeigen, dass bei über 85 % der Verbraucher die Punkteauswirkungen innerhalb von +/- 10 Punkten lagen. Erwähnenswert ist, dass Verbraucher mit fünf oder mehr Affirm BNPL-Darlehen höhere Scores oder keine Veränderungen erlebten. FICO entwickelte einen proprietären Ansatz, der mehrere BNPL-Darlehen bei der Berechnung bestimmter Variablen aggregiert, wodurch prädiktive Signale effektiv erfasst und möglicherweise die Scores für einige BNPL-Nutzer erhöht werden.
Basierend auf diesen Ergebnissen entwickelt FICO eine Lösung, um seine proprietäre Behandlung von BNPL-Daten im Kreditbewertungsmarkt umzusetzen.
- Study shows BNPL data inclusion can improve FICO scores for some consumers
- 85% of consumers show minimal score impact (within +/- 10 points)
- Consumers with 5+ BNPL loans experienced higher scores or no changes
- New scoring model shows improved predictiveness for risk assessment
- None.
Insights
FICO's groundbreaking research with Affirm marks a pivotal shift in credit scoring methodology, with significant implications for the $180+ billion BNPL market. The study's findings demonstrate FICO's adaptive approach to evolving consumer credit behaviors, potentially expanding credit accessibility while maintaining robust risk assessment standards.
The proprietary treatment developed for BNPL loans represents a strategic innovation that could strengthen FICO's market position in several ways:
- Enhanced scoring accuracy through aggregation of multiple BNPL loans, addressing a key challenge in the BNPL space
- Improved risk assessment capabilities that maintain model performance while accommodating new credit products
- Potential for increased revenue through new scoring products specifically designed for BNPL evaluation
For investors, this development carries multiple positive implications:
- Reinforces FICO's technological moat in credit scoring innovation
- Opens new revenue streams in the rapidly growing BNPL sector
- Positions FICO as the standard-setter for BNPL credit evaluation
- Demonstrates the company's ability to adapt to evolving financial products while maintaining its core strength in risk assessment
The minimal score impact for most consumers (less than 10 points for 85% of study participants) suggests a well-calibrated approach that could accelerate BNPL adoption while preserving credit score integrity. This balanced methodology could drive increased demand for FICO's scoring products from both traditional lenders and BNPL providers.
First-of-its-kind analysis finds Affirm customers with multiple BNPL loans would be most likely to experience score increases with FICO’s innovative treatment of that data
FICO conducted the 12-month study in partnership with Affirm (NASDAQ: AFRM), the payment network that empowers consumers and helps merchants drive growth. The research compared the FICO® Scores of more than 500,000 consumers who opened at least one new Affirm BNPL loan against a benchmark population of consumers without an Affirm BNPL loan. FICO simulated the inclusion of these Affirm loans into consumers’ credit reports, and then examined the potential impact to resulting credit scores of those consumers.
The goal of the research was focused on outlining the potential benefits or impacts that BNPL lending products could have on FICO® Scores. It was also intended to help inform both responsible furnishing of BNPL loans to the credit bureaus, as well as an appropriate and empirically supported treatment of this data within the FICO Score. Through this first-of-its-kind study with Affirm, FICO developed a proprietary treatment to harness the benefits offered by incorporation of BNPL data into consumers’ FICO Score calculation. The research showed that this treatment can improve model performance and lead to increased FICO Scores for some BNPL borrowers.
“Given the growing popularity of BNPL loans, understanding how to effectively capture the benefit that BNPL data can have on FICO Scores is crucial to all stakeholders in the credit ecosystem,” said Ethan Dornhelm, vice president of Scores and Predictive Analytics at FICO. “Our findings show that the inclusion of BNPL data via our innovative treatment can drive score increases for some consumers, while improving model risk performance for lenders. We appreciate Affirm’s leadership and collaboration on this study.”
A unique consumer behavior associated with BNPL loans is the potential for a large number of these loans to be opened within a short period of time. To address this, FICO developed an innovative approach that includes aggregating separate BNPL loans together when calculating certain in-model variables. This novel treatment has proven effective at capturing predictive signal from the inclusion of BNPL data while increasing FICO® Scores for some BNPL consumers.
Key findings
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Utilizing FICO’s novel treatment, the simulated inclusion of BNPL data into consumers’ credit files yielded:
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FICO Score impacts that were generally consistent with the opening of a new account – within less than +/- 10 points for over
85% of the consumers in the study. - Higher scores or no score changes for the majority of the population of consumers in the study who had recently obtained five or more Affirm BNPL loans.
- Impacts on FICO Score predictiveness ranging from modest improvement to no adverse impact, across a range of different use cases.
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FICO Score impacts that were generally consistent with the opening of a new account – within less than +/- 10 points for over
- Given the unique aspects of BNPL loans, FICO’s empirically supported treatment of this data is necessary to mitigate impacts to borrowers, and maintain credit risk assessment effectiveness.
“We appreciate the collaboration and partnership with FICO as we sought to conduct a thorough analysis examining the impact of furnishing BNPL loans on credit scores,” said Don Lemire, vice president of Credit Analytics at Affirm. “Through studies like this, we aim to drive greater transparency and promote industry best practices for responsible reporting of BNPL data to credit bureaus. We invite other providers of pay-over-time products to join us in conducting studies with FICO and committing to furnish data on all BNPL loans in a manner that is beneficial for consumers and the broader financial system.”
Based on learnings from this industry-leading analysis, FICO is developing a solution to introduce its proprietary treatment of BNPL data to the credit-scoring marketplace. FICO will be releasing more information on this exciting product development soon.
“As the provider of the credit score relied on by
About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 200 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, insurance, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 4 billion payment cards from fraud, to improving financial inclusion, to increasing supply chain resiliency. The FICO® Score, used by
Learn more at https://www.fico.com.
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FICO is a registered trademark of Fair Isaac Corporation in the
About Affirm
Affirm’s mission is to deliver honest financial products that improve lives. By building a new kind of payment network – one based on trust, transparency and putting people first – we empower millions of consumers to spend and save responsibly, and give thousands of businesses the tools to fuel growth. Unlike most credit cards and other pay-over-time options, we never charge any late or hidden fees. Follow Affirm on social media: LinkedIn | Instagram | Facebook | X.
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FICO
Julie Huang
press@fico.com
Affirm
Brian Levin
press@affirm.com
Source: FICO
FAQ
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