Personal Finance: FICO meets buy now, pay later | Chattanooga Times Free Press
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Diverging Reports Breakdown
Buy Now, Pay Later loans will soon affect some credit scores
Scoring company FICO said Monday that it is rolling out a new model that factors the short-term loans into their consumer scores. Previously, the loans had been excluded. Buy Now, Pay Later company Affirm began voluntarily reporting pay-in-four loans to Experian, a separate credit bureau, in April. The new FICO scores will be available beginning in the fall, as an option for lenders to increase visibility into consumers’ repayment behavior, the company said. But not all companies share their data with the credit bureaus, and not all lenders will opt in to using the new models, so widespread adoption could take time, says Adam Rust, director of financial services at the nonprofit Consumer Federation of America. The integration of loans into a score could have unexpected negative effects on people who are already credit-restrained, a senior policy and litigation counsel at the Center for Responsible Lending says. But if you pay back your BNPL loans in a timely way, the new credit scoring model could help you improve your credit scores.
Scoring company FICO said Monday that it is rolling out a new model that factors the short-term loans into their consumer scores. A majority of lenders use FICO scores to determine a borrower’s credit worthiness. Previously, the loans had been excluded, though Buy Now, Pay Later company Affirm began voluntarily reporting pay-in-four loans to Experian, a separate credit bureau, in April.
The new FICO scores will be available beginning in the fall, as an option for lenders to increase visibility into consumers’ repayment behavior, the company said. Still, not all Buy Now, Pay Later companies share their data with the credit bureaus, and not all lenders will opt in to using the new models, so widespread adoption could take time, according to Adam Rust, director of financial services at the nonprofit Consumer Federation of America.
FILE – A woman walks by a sign “Buy now pay later” at a store in Bangalore, India, on Sept. 10, 2009. (AP Photo/Aijaz Rahi, File)
Here’s what to know.
Why haven’t the loans appeared in credit scores previously?
Typically, when using Buy Now, Pay Later loans, consumers pay for a given purchase in four installments over six weeks, in a model more similar to layaway than to a traditional credit card. The loans are marketed as zero-interest, and most require no credit check or only a soft credit check.
The main three credit reporting bureaus, Experian, TransUnion, and Equifax, haven’t yet incorporated a standard way of including these new financial products in their reports, since they don’t adhere to existing models of lending and repayment. FICO, the score of the Fair Isaac Corporation, uses data from the bureaus to calculate its own credit score, and is independently choosing to pilot a new score that takes the loans into account.
Why is this important?
BNPL providers promote the plans as safer alternatives to credit cards, while consumer advocates warn about “loan stacking,” in which consumers take on many loans at once across several companies. So far, there’s been little visibility into this practice in the industry, and the opacity has led to warnings of “phantom debt” that could mask the health of the consumer.
In a statement, FICO said that their new credit score model is accounting for the growing significance of the loans in the U.S. credit ecosystem.
“Buy Now, Pay Later loans are playing an increasingly important role in consumers’ financial lives,” said Julie May, vice president and general manager of business-to-business scores at FICO. “We’re enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products.”
What does FICO hope to achieve?
FICO said the new model will responsibly expand access to credit. Many users of BNPL loans are younger consumers and consumers who may not have good or lengthy credit histories. In a joint study with Affirm, FICO trained its new scores on a sample of more than 500,000 BNPL borrowers and found that consumers with five or more loans typically saw their scores increase or remain stable under the new model.
For consumers who pay back their BNPL loans in a timely way, the new credit scoring model could help them improve their credit scores, increasing access to mortgages, car loans, and apartment rentals. Currently, the loans don’t typically contribute directly to improved scores, though missed payments can hurt or ding a score.
Since March, credit scores have declined steeply for millions, as student loan payments resume and many student borrowers find themselves unable to make regular payments on their federal student loans.
What are the risks and concerns?
Nadine Chabrier, senior policy and litigation counsel at the Center for Responsible Lending, said her main concern is that the integration of the loans into a score could have unexpected negative effects on people who are already credit-restrained.
“There isn’t a lot of information out there about how integrating BNPL into credit scoring will work out,” Chabrier said. “FICO simulated the effect on credit scoring through a study. They saw that some users’ scores increased. But if you factor in something that, last week, didn’t affect your credit, and this week, it does, without having very much information about the modeling, it’s a little hard to tell what the consequences will be.”
Chabrier cited research that’s shown that many BNPL users have revolving credit card balances, lower credit scores, delinquencies, and existing debt. Women of color are also more likely to use the loans, she said.
“This is a credit vulnerable community,” said Chabrier.
Will consumers see immediate effects?
Rust, of the Consumer Federation of America, said he doesn’t expect this to be a game-changer for consumers who already have a credit profile.
“Are we at a point where using BNPL loans will dramatically alter your credit profile? Probably not,” he said. “I think it’s important that people have reasonable expectations.”
Rust said the average BNPL loan is for $135, and that repaying such small loans, even consistently, might not result in changes to a credit score that would significantly move the needle.
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“It’s not about going from 620 to 624. It’s about going from 620 to 780,” he said, referring to the kind of credit score jumps that affect one’s credit card offers, interest rates on loans, and the like.
Still, Rust said that increased transparency around the loans could create a more accurate picture of a consumer’s debts, which could improve accurate underwriting and keep consumers from over-extending themselves.
“This addresses the problem of ‘phantom debt,’ and that’s a good thing,” he said. “Because it could be something that keeps people from getting too deeply into debt they can’t afford.”
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The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
7 Best Credit Monitoring Services of July 2025
Credit monitoring services can keep track of the data in your credit reports from the three major credit bureaus. Experian is the best overall credit monitoring service while Aura has low costs for both its individual and family plans. We found that the best credit monitoring services are transparent about their fees and services, provide frequent credit reports (and score refreshes) and have helpful tools for protecting your identity. All of our picks have dark web scanning and educational content on credit monitoring or identity protection (or both) The paid version of Experian offers more bells and whistles, such as helping remove personal information found in the personal privacy scan from websites, as well as three-bureau monitoring. The free version also comes with a personal scan that can show whether your address, phone number, relatives’ names and more are publicly available and are available on publicly available websites. The company offers the credit-scoring model used by the majority of lenders and offers a free and paid version that offers FICO score, among other features.
Comprehensive fraud alerts and credit freeze option
Receive a monthly credit score and a full credit report annually
Monitors your credit report from all three major credit bureaus Our Partner VIEW PLANS 401(k) & Investment Account Alerts 3-Bureau Credit & SSN Monitoring
Credit Reports & Credit Scores
Add Device Security & VPN Our Partner VIEW PLANS Limited Offer Save Up To 73% All Plans Include $1 Million Identity Theft Insurance*
Real Time Monitoring of Your SSN, Accounts & Identity
3-Bureau Customer Care Team
US-based Customer Care Team
White GloveFraud Resolution Our Partner VIEW PLANS Cybersecurity and device protection Credit monitoring & fraud alerts
Full-service identity restoration
Licensed private investigators
Up to $3 million protection
If personal details like your Social Security number or bank account information have ever been compromised, or you’re looking to increase your credit score before you buy a home or finance a car, you may be searching for a way to keep tabs on your credit.
Depending on your needs, a credit monitoring service — which can notify you when a credit application has been made in your name — could be a smart solution. These companies vary in cost, features and tools, so it’s important to understand exactly what you’re looking for (and what you’re likely to get). Some people may just want basic alerts for new credit activity, while others might prefer in-depth reports or more thorough identity protection measures.
To help you find the right fit, we’ve rounded up our top picks for the best credit monitoring companies.
What to know about credit monitoring
We found that the best credit monitoring services are transparent about their fees and services, provide frequent credit reports (and score refreshes), offer identity theft insurance and have helpful tools for protecting your identity.
All of our picks have dark web scanning and educational content on credit monitoring or identity protection (or both).
Experian is the best overall credit monitoring service while Aura has low costs for both its individual and family plans. PrivacyGuard makes sense for people specifically worried about identity protection.
How we chose our top picks
We reviewed a variety of free and paid credit monitoring services to ensure our content would be relevant, precise and accurate. We spoke to experts about what to look for when choosing a credit monitoring service. Ultimately, we decided our ranking based on 16 data points, including cost and how often reports are provided.
Credit monitoring services can keep track of the data in your credit reports from the three major credit bureaus — Equifax, Experian and TransUnion — but not all of them offer three-bureau monitoring. For this list, we considered whether services had one-, two- or three-bureau monitoring, along with features like dark web scanning for signs of identity theft and cybersecurity tools to help protect your phone and computers.
Read the full methodology to learn more.
Our top picks for credit monitoring services
Experian — Best Overall
Aura — Best Low-Cost Credit Monitoring for Individuals or Families
PrivacyGuard — Best for Credit Reports and Identity Protection
Credit Karma — Best Free Credit Monitoring Service
IdentityForce — Best for Identity Theft Features
IDShield — Best for Cybersecurity Features
myFICO — Best for Access to FICO Score
Pros Has a free and paid version
Offers FICO score
Personal privacy scans and other good features
Family plan includes up to 12 people Cons Need to pay for three-bureau monitoring (otherwise it’s just Experian)
Free version is very basic
HIGHLIGHTS Cost: Free; $24.99 per month for Premium; $34.99 per month for Family Number of credit bureaus monitored: Three Credit score model: FICO Trial period: Seven days
Why we chose it: Experian is one of the few services on this list that monitors your FICO score, the credit-scoring model used by the majority of lenders. The company offers free version that’s fairly basic and only offers information from your Experian report — though, depending on your needs, that may be enough. The free version also comes with a personal privacy scan that can show whether your address, age, phone number, relatives’ names and more are publicly available.
The paid version offers more bells and whistles, such as helping remove any personal information found in the personal privacy scan from websites, as well as three-bureau monitoring. It’s a bit pricier than some other services we listed, but the extra identity protection features could be worth it. The family plan covers two adults and up to 10 kids.
Read Money’s full Experian review.
Best Low-Cost Credit Monitoring for Individuals or Families: Aura Our Partner View Plans
Pros 24/7 phone support
Monitors up to 70 items
Online safety features including a password manager and antivirus protection
Family plan includes five adults and unlimited children Cons Pricier than other services on our list
Customer complaints about app stability and functionality
HIGHLIGHTS Cost: $15 per month for Individual; $29 per month for Couple; $50 per month for Family plan Number of credit bureaus monitored: Three Credit score model: VantageScore Trial period: 14 days
Why we chose it: Aura is slightly more expensive than other services on this list, but that added cost unlocks a full suite of comprehensive identity protection tools. The three-bureau monitoring service can monitor more than 70 items — such as your driver’s license number, passport and email addresses — for data breach exposure. It also alerts you if your identity is used for high-risk transactions, scans every new file for malware on up to 10 devices per adult, handles junk mail and spam call removal requests, comes with a password manager extension and more.
The family plan includes five adults, unlimited children and unlimited devices. That’s more than what you’ll get with Experian’s family plan (but at a higher price).
Read Money’s full Aura Identity Theft Protection review.
Best for Credit Reports and Identity Protection: PrivacyGuard View Plans
Pros Monthly credit reports and scores
Wide range of identity protection features Cons Lowest-priced plan doesn’t include credit monitoring features and only most expensive plan has credit and identity protection
No customer service help via chat
HIGHLIGHTS Cost: $19.99 per month for Credit Protection; $24.99 per month for Total Protection Number of credit bureaus monitored: Three Credit score model: VantageScore Trial period: 14 days (for $1)
Why we chose it: If you’re looking for advanced identity protection services, you may want to opt for PrivacyGuard Total Protection, which includes both credit and identity protection. You’ll get monthly three-bureau reports and scores. That’s in addition to features like a dedicated agent to walk you through what to do if your identity is stolen and a credit score simulator, which lets you see how changes in behavior can impact your credit score. The least-expensive PrivacyGuard plan is only $9.99, but it doesn’t come with credit monitoring, so we didn’t factor it into our ranking.
Read Money’s full PrivacyGuard review.
Best Free Credit Monitoring Service: Credit Karma View Plans
Pros Free credit monitoring
In-depth educational content on a wide range of personal finance topics Cons Credit score only comes from Equifax and TransUnion
Pervasive card and loan offers
HIGHLIGHTS Cost: Free Number of credit bureaus monitored: Two Credit score model: VantageScore Trial period: Not applicable (free)
Why we chose it: Credit Karma is a free credit monitoring service that checks your credit reports daily from Equifax and TransUnion for changes. However, the service only provides your VantageScore.
Note that the Federal Trade Commission has taken action against Credit Karma, alleging that the many people who received “pre-approved” credit offers did not actually qualify, wasted time applying and, in some cases, saw their credit scores drop when their applications were denied. However, if you’re looking for the very basics, it could be a good option.
Best for Identity Theft Features: IdentityForce Our Partner View Plans
Pros Wide range of identity theft features
$2 million in identity theft insurance
Access to a dedicated restoration specialist if your identity is stolen Cons Less expensive plan doesn’t have credit monitoring
No free trial for plan with credit monitoring
HIGHLIGHTS Cost: $34.90 per month for UltraSecure+Credit Individual Number of credit bureaus monitored: Three Credit score model: VantageScore Trial period: None
Why we chose it: IdentityForce from TransUnion is more focused on identity theft than credit monitoring, but its UltraSecure+Credit Individual plan offers coverage for both. Its identity theft features include access to a dedicated restoration specialist who will help you restore your identity if it’s compromised, risk scores for each dark web hit, phishing monitoring and more. It also comes with $2 million in identity theft insurance ($1 million is a common industry standard).
We didn’t consider the UltraSecure Individual plan, which has a 30-day free trial and then is $19.99 per month, because it doesn’t include credit monitoring.
Read Money’s full IdentityForce review.
Best for Cybersecurity Features: IDShield Our Partner View Plans
Pros Protects three devices from viruses, malware and ransomware
Identity threat alerts and social media monitoring
24/7 emergency assistance when fraud occurs Cons Need to pay extra for three-bureau monitoring
No free trial
HIGHLIGHTS Cost: $14.95 for one-bureau monitoring Individual Plan; $19.95 for three-bureau monitoring Individual Plan; $29.95 for one-bureau monitoring Family Plan; $34.95 for three-bureau monitoring Family Plan Number of credit bureaus monitored: One or three, depending on tier Credit score model: VantageScore Trial period: No
Why we chose it: IDShield focuses on identity protection and cybersecurity threats. While you’ll get features like protection from viruses, malware and ransomware on devices, the credit monitoring is a bit more limited. You’ll have to pay extra to get three-bureau monitoring, and although the service provides monthly credit scores, you won’t receive credit reports.
Read Money’s full IDShield review.
Best for Access to FICO Score: myFICO View Plans
Pros Provides FICO scores instead of VantageScore
24/7 emergency support for ID theft
Free version Cons $1 million identity theft insurance only comes with paid plans
Limited cybersecurity and identity protection features
HIGHLIGHTS Cost: Free; $29.95 per month for Advanced; $39.95 for Premier Number of credit bureaus monitored: One or three, depending on tier Credit score model: FICO Trial period: No
Why we chose it: If you’re looking for a service that provides your FICO instead of VantageScore, there aren’t many options — but myFICO is one. The free plan offers one-bureau coverage with updates available monthly, the Advanced plan offers three-bureau monitoring with updates available every three months, and the Premiere plan offers three-bureau monitoring with updates available every month.
You can get identity theft and cybersecurity features as well as credit monitoring with other companies at a similar price point.
Read Money’s full myFICO review.
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Other credit monitoring services we considered
We assessed many credit monitoring services that ultimately did not make our list. Below are several companies that were not named on our list but that may still be a fit for you.
Credit Sesame allows you to get your credit score daily for free, but you’ll have to pay for the two premium tiers — one that offers one-bureau monitoring ($12.99 per month) and a more expensive one that offers three-bureau monitoring ($24.99 per month) — for more detailed reports. The service only provides your VantageScore and offers far fewer identity protection features than some of the other services on the list.
Equifax has three plans. One (for $16.95 per month) provides a three-bureau credit report annually. Another ($19.95 per month) adds extra features such as identity restoration help as well as your three-bureau credit score annually and one-bureau credit score daily. The most expensive option ($29.95 per month) adds services for a second adult and up to four kids. All the plans come with Equifax credit reports. But Equifax has poor customer service reviews. In the public eye, it’s still recovering from a 2017 data breach that exposed 147 million peoples’ personal information.
ID Watchdog offers either one- or three-bureau monitoring, depending on the tier you pay for. The cheaper plan ($14.95 per month) only offers a one-bureau credit report and score monthly. The Premium one ($21.95 per month) offers those reports and scores daily; it shares a three-bureau report and score annually, which is less often than other services.
What to know about credit monitoring
Credit monitoring can be an important part of a financial plan because it alerts you of any suspicious activity regarding your credit. Depending on the service you opt for, you may also be able to get in-depth information on why your credit score has changed (including for legitimate reasons, such as if you get a new credit card). This tracking can be useful if you’re trying to boost your score.
“For people just starting out who are trying to buy a home, even increasing their credit score by 20 or 50 points is pretty meaningful,” says Ben Loughery, a financial advisor and founder of Lock Wealth Management. “It’s good hygiene to check in every six months at minimum.”
How does credit monitoring work?
Credit monitoring services generally kick off their work by asking you for some personal information, such as your date of birth, address and phone number. They then access your credit reports from the credit bureaus (up to three, depending on the service) and monitor them on an ongoing basis.
The services will alert you when there’s activity in your accounts. That can include new credit inquiries from a lender, landlord or employer, as well as new accounts being opened, an address change or a change in public records. They can also notify you specifically about an increase or decrease in your credit score.
The frequency of the reports and score refreshes — as well as other services like monitoring credit cards and investment accounts for suspicious activity — will depend on the company.
Keep in mind that credit monitoring can’t prevent your identity from being stolen, but it can help you prevent further damage. Loughery recommends pairing credit monitoring with other protective measures, like using a password manager, for maximum effect.
How to choose a credit monitoring service
Credit monitoring services generally come with a wide range of fees and services. Here are some factors to consider when choosing which company to use.
Credit monitoring offering
FICO scores are used by 90% of top lenders, but VantageScore has emerged as a viable alternative. If you’re OK with getting your VantageScore instead of FICO — which for most people, will work well for credit monitoring purposes — you’ll have more options.
When choosing between companies, look at how many reports you can get access to, since some only offer reports from one credit bureau while others offer two or three, says Chris Mankoff, a wealth advisor at JTL Wealth Partners. Ideally, you’ll want to choose a plan that has three-bureau monitoring and allows for regular score refreshes and reports. You’re probably going to have to pay more for monthly reports than annual ones, but that may be worth it.
Cost
Many credit monitoring services are free, and Mankoff says that the basics may be enough for many people. His wife, for instance, received an alert via their free service that said a credit card was taken out in her name. She hadn’t opened the account and, out of caution, they both froze their credit.
But if you want more regular reporting, identity protection and cybersecurity features, and more than one person on your account, you’ll have to pay for it.
Features
Some credit monitoring services have extra tools to help keep your identity protected, as well as specialists who will work one-on-one with you if it’s compromised. Most have some form of identity protection insurance and dark web scanning, but you may want to check for offerings like social media monitoring, a password manager, VPNs and more. Mankoff says some services partner with different lending companies that can provide you a snapshot of what type of loans are available to you based on your score, which can be helpful if you’re looking to consolidate debt.
Customer service
These services tend to offer phone, chat or email services (or some combination of those). Before choosing a company and forking over your hard-earned cash, make sure you’ll be able to easily contact them when you need help. You can also do some research by reading customer reviews posted on TrustPilot and the Better Business Bureau.
Latest credit monitoring news
In January, the Consumer Financial Protection Bureau (CFPB) sued Experian for allegedly failing to properly investigate consumer disputes. The bureau said in a news release that Experian “does not take sufficient steps to intake, process, investigate and notify consumers about consumer disputes, resulting in the inclusion of incorrect information on credit reports.” The news was related to Experian’s credit reporting, not necessarily its credit monitoring services.
Since then, the Trump administration has made moves to curb the CFPB’s staffing levels and oversight, with mixed results. In April, a federal appeals court panel temporarily blocked the Trump administration from proceeding with the layoffs, calling the attempt to gut the agency “illegal” in the 112-page decision. Now, Senate Republicans are pushing to slash the CFPB’s budget by half as part of President Trump’s sweeping tax and spending bill — a move that could result in hundreds of layoffs if the proposed funding cuts make it through Congress.
Separately, TransUnion found in March that the severity of U.S. data breaches has hit a record high. Although the number of data breaches dropped from 2,842 to 2,577 in 2024, the level of risk associated with them surged by 34%. (A more “severe” data breach is one that’s particularly aggressive or one that leaks high-quality credentials.)
And finally, the nation’s average credit score fell to 715, according to a report from credit scoring firm FICO, which pinned the blame for the dip on past-due federal student loan bills. Consumers could see further fluctuations in credit scores now that FICO plans to incorporate buy now, pay later (BNPL) loans.
Credit monitoring FAQs What is the difference between credit monitoring, credit repair and identity theft protection? chevron-down chevron-up While credit monitoring services continuously scan your credit file and alert you of changes, credit repair services can help you remove errors from your credit file and navigate the dispute process. Identity theft services scan for your personal information on the dark web, social networks and public records. Why is it important to monitor your credit score? chevron-down chevron-up Monitoring your credit can help you catch errors and suspicious activity on your report. While credit monitoring services are typically used to monitor for identity theft, they can also provide you with more information on your own credit activity and why it may be impacting your credit score. Does credit monitoring affect your credit score? chevron-down chevron-up No, credit monitoring will not affect your credit score since it’s a soft inquiry. Only hard inquiries, such as applying for a new loan, will impact your credit score.
How we chose the best credit monitoring services
To find the best credit monitoring services, we compared plans from 16 companies. Then we narrowed in on 16 data points to form our methodology. These data points fell into five categories: credit monitoring offering, cost, features, customer service and ease of use. Credit monitoring offerings made up 23% of the scores while cost made up 25%, as these are two of the main factors we believe customers should consider. Features, customer service and ease of use made up 20%, 17% and 15%, respectively.
Below are more details on the data points considered within each category.
Credit monitoring offering: We considered the number of credit bureaus monitored, the credit score model used and how often reports — and credit score refreshes — are available.
We considered the number of credit bureaus monitored, the credit score model used and how often reports — and credit score refreshes — are available. Cost: For the cost factor, we considered the fees, whether there is a free version of the service and whether there is a free trial. These costs were up to date as of late February 2025 unless otherwise specified.
For the cost factor, we considered the fees, whether there is a free version of the service and whether there is a free trial. These costs were up to date as of late February 2025 unless otherwise specified. Features: We assessed companies based on their identity theft insurance and dark web scanning offerings, as well as other security and identity protection features.
We assessed companies based on their identity theft insurance and dark web scanning offerings, as well as other security and identity protection features. Customer service: This scoring took customer service availability, TrustPilot and BBB reviews into account.
This scoring took customer service availability, TrustPilot and BBB reviews into account. Ease of use: For insights on ease of use, we considered mobile app ratings, availability of educational material and transparency about the costs and features.
Summary of our top picks for credit monitoring
Experian — Best Overall
Aura — Best Low-Cost Credit Monitoring for Individuals or Families
PrivacyGuard — Best for Credit Reports and Identity Protection
Credit Karma — Best Free Credit Monitoring Service
IdentityForce — Best for Identity Theft Features
IDShield — Best for Cybersecurity Features
myFICO — Best for Access to FICO Score
What Credit Score Do You Need for a Personal Loan?
The typical minimum credit score needed to qualify for a personal loan is from 550 to 660. A high credit score doesn’t guarantee you’ll qualify or get a low interest rate. Lenders give preference to borrowers with good or excellent credit scores (mid 600s and above) Some lenders accept borrowers with bad credit (a score in the 500s or below) A low credit score resulting in a higher APR means your monthly payments will be higher, since you’ll be paying more in interest. The lowest credit scores — usually below 500 — are unlikely to qualify with maximum APRs below 36%. Lenders that offer no-credit-check personal loans may charge triple digit interest in lieu of not thoroughly evaluating your ability to repay the loan. These loans typically have shorter repayment terms, and your interest costs could surpass the amount you initially borrowed. The average estimated personal loan APR based on credit score ranges is 13.31%. Good 690-719. 16.48%. Fair 630-689 20.23%. Bad 300-629 20.62%.
Many lenders give preference to borrowers with good or excellent credit scores (mid 600s and above), but some accept borrowers with bad credit (a score in the 500s or below).
Lenders often look at the FICO credit scoring model, but some use VantageScore . Other lenders say they use many data points to determine approval, which may include a FICO or VantageScore.
A high credit score doesn’t guarantee you’ll qualify or get a low interest rate. Qualifying rests largely on your creditworthiness, which is usually a combination of your credit history and score, in addition to income and debt. Use this tool to learn what loan options you may have based on your credit score.
How your credit score impacts your personal loan offer
Your credit score not only affects whether you qualify for a personal loan, but it also helps determine what annual percentage rate , or APR, you’ll receive. Borrowers with good scores are likely to qualify for a lower APR than bad-credit borrowers.
Your APR is made up of your interest rate plus any origination fee your lender charges, and lenders are more likely to charge a higher origination fee if you have bad credit.
Here are the average estimated personal loan APRs based on credit score ranges:
Borrower credit rating Score range Estimated APR Excellent 720-850. 13.31%. Good 690-719. 16.48%. Fair 630-689. 20.23%. Bad 300-629. 20.62%.
Source: Average rates are based on aggregate, anonymized offer data from users who pre-qualified through NerdWallet from May 1, 2025, through May 31, 2025. Rates are estimates only and not specific to any lender. The lowest credit scores — usually below 500 — are unlikely to qualify. Information in this table applies only to lenders with maximum APRs below 36%.
A low credit score resulting in a higher APR means your monthly payments will be higher, since you’ll be paying more in interest.
A low credit score could also be the reason a lender approves you for a small loan amount.
Getting a personal loan with fair or bad credit
Though lenders consider multiple factors on a loan application, your credit score is often given a lot of weight.
It’s possible to get a personal loan with fair or bad credit, but you’re likely to receive a rate on the high end of a lender’s range, which can be up to 36%. Those with a score below 550 may not qualify for a loan with an APR below 36% — the highest interest rate an affordable loan can have, according to most consumer advocates.
🤓 Nerdy Tip Lenders that offer no-credit-check personal loans may charge triple digit interest in lieu of not thoroughly evaluating your ability to repay the loan. These loans typically have shorter repayment terms, and your interest costs could surpass the amount you initially borrowed.
Lenders that offer fair-credit loans may look beyond your credit score to make an approval decision. Credit unions , for example, may consider membership history and other factors on an application.
Adding a co-signer, co-borrower or collateral to your loan application may help you qualify or get a lower rate, but not all lenders offer these options. If you default on a co-signed or joint loan , your co-signer or co-borrower will be responsible for making payments. If you stop making payments on a secured loan , you’ll lose your collateral.
Tips to build your credit
If you have time to build credit before applying, you may improve your chance of qualifying for a personal loan at a low rate. It’ll likely take a few months for these steps to affect your score, but it may be worth it if you get a lower rate on a loan you’ll be repaying for a year or more.
1. Make payments on time
Credit card and loan payments that are more than 30 days past due can cause your credit score to drop by about 100 points. Consider setting up automatic payments or due date reminders to ensure you won’t miss payments on your current debts. If the payment date doesn’t work for you, ask your creditors to change it.
2. Dispute credit reporting errors
Review your credit reports from each of the three credit bureaus — Equifax, Experian and TransUnion — to see if there are any errors that may be dragging your score down, like incorrect account balances or accounts you don’t recognize. Dispute any mistakes online, by mail or by phone. You can get weekly credit reports for free at AnnualCreditReport.com
3. Lower your credit utilization
Your credit utilization ratio is the percentage of your available revolving credit that you’ve used. Try to keep this number below 30%. If it’s higher, take time to pay down your credit card balances and other credit lines. Requesting a credit limit increase can also lower your credit utilization.
4. Become an authorized user on someone’s credit card
If you know someone with a higher credit score who will let you become an authorized user on their credit card, you can benefit from their good credit habits, such as on-time payments or a low credit utilization. You aren’t responsible for the cardholder’s balance and don’t even need access to the credit card.
5. Get a credit-builder loan or secured credit card
Both a credit-builder loan and a secured credit card require you to pay money upfront – either in the form of loan payments or a security deposit – before you borrow from the lender. This reduces the lender’s risk, making them easier to qualify for, while on-time payments build up your credit score
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Requirements for a personal loan beyond credit score
Meeting a lender’s requirements for minimum credit score doesn’t necessarily mean you’ll qualify for a loan.
Here are the other factors most lenders review on a personal loan application:
Credit history: Lenders like to see a long credit history on a loan application. A lender may say it requires a minimum of two or three years of credit history, but longer is typically better. More accounts throughout your credit history show a lender how diligently you’ve made payments. Borrowers with multiple credit cards, a mortgage, or an auto loan showing regular on-time payments may be more likely to qualify.
Income: Lenders may ask for copies of your pay stubs, bank statements or tax documents to ensure you have a steady source of income. Some lenders have specific income requirements, while others just want to know you’re bringing in enough money to repay your personal loan.
Debt-to-income ratio: Lenders seek borrowers who make enough money to meet their current monthly financial obligations, plus loan payments. Many use your Lenders seek borrowers who make enough money to meet their current monthly financial obligations, plus loan payments. Many use your debt-to-income ratio to see whether another loan would overextend your finances.
Free cash flow: Your debt-to-income ratio doesn’t account for expenses like gas, groceries and rent, so some lenders look at bank account transactions to see how much money borrowers have left after other expenses. Lenders call this “free cash flow,” and the more of it you have, the more confident a lender may feel approving your application.
Alternatives to personal loans
You may have other ways to borrow money, even if you don’t meet credit score requirements for a personal loan.
Buy now, pay later : Many major retailers offer “buy now, pay later” plans that break the cost of a purchase into smaller payments – typically four interest-free biweekly payments. The BNPL company may perform a soft credit check, but you generally don’t need a high credit score to be approved. Many major retailers offer “buy now, pay later” plans that break the cost of a purchase into smaller payments – typically four interest-free biweekly payments. The BNPL company may perform a soft credit check, but you generally don’t need a high credit score to be approved.
Cash advance apps : Apps like Apps like Dave and Brigit approve borrowers for small loans based on their income, not their credit scores. You’re essentially getting an advance on your upcoming paycheck, but borrowing can come with fees.
Family loans : Getting a loan from a family member or friend requires no credit check and may be interest free. To avoid disputes that can sour the relationship, have both parties sign a loan agreement detailing how the money will be repaid. Getting a loan from a family member or friend requires no credit check and may be interest free. To avoid disputes that can sour the relationship, have both parties sign a loan agreement detailing how the money will be repaid.
Local financial assistance programs : Nonprofits, religious groups and charities in your area may operate programs to help people with food, clothing, transportation, rent payments, utilities and other essential needs. Contact Nonprofits, religious groups and charities in your area may operate programs to help people with food, clothing, transportation, rent payments, utilities and other essential needs. Contact 211 to find what’s available near you.
Buy Now, Pay Later Can Impact Your Credit Score — Here’s Why
Affirm just announced it will start reporting all pay-over-time loans, including Pay in 4, to the credit bureaus Experian and TransUnion. BNPL doesn’t affect borrowers’ credit scores very much right now, but might have a significant impact in the near future. Buy now, pay later (BNPL) has shaken up the credit game with its low-or-no-interest payment plans for large purchases. It’s especially favored among young people, but missed payments could also hurt their credit. The most common BN PL plans, like Affirm’S Pay in. 4, usually only allow soft credit inquiry for approval, which doesn’t affect your score, which can be viewed by creating a free Experian membership.. Your Affirm activity will appear on your TransUnion credit report starting May 1, 2025, and can be seen by creating an Experian Membership, which costs $99 a year. For purchases of $50 to over $1,000, you can make four payments over time, with two weeks between each payment. You’re not charged interest or fees.
Who uses buy now, pay later?
Key takeaways Affirm just announced it will start reporting all pay-over-time loans, including Pay in 4, to the credit bureaus Experian and TransUnion.
BNPL doesn’t affect borrowers’ credit scores very much right now, but might have a significant impact in the near future.
BNPL users — often young people — will have the chance to build their credit with on-time payments. But missed payments could also hurt their credit.
Buy now, pay later (BNPL) has shaken up the credit game with its low-or-no-interest payment plans for large purchases. In fact, Bankrate’s 2024 Buy Now, Pay Later Survey reported that nearly 2 in 5 Americans (39 percent) have used a BNPL service. It’s especially favored among young people.
Those payments, for better or worse, tend to fly under the credit radar. While on-time or missed payments on a credit card or personal loan can help build — or break — your credit, the same hasn’t been true for BNPL.
But BNPL lender Affirm announced recently that it will start reporting all pay-over-time transactions to Experian and TransUnion, two major credit bureaus.
Affirm already reports monthly payments on longer-term loans. But now, the popular Pay in 4 plan — which lets you break up a purchase into four interest-free payments — will also show up on your Experian and TransUnion credit reports. That includes the original and outstanding balance, payment history and loan terms.
“Having all loans reflected in a consumer’s financial profile will help protect and empower borrowers,” says Libor Michalek, president at Affirm in a press release.
What is Affirm?
One of the major BNPL lenders on the market, Affirm offers payment plans with interest rates ranging from 0 to 36 percent. It’s easy to qualify for Affirm, making it a popular choice for people with poor credit or tight budgets.
Bankrate data shows that, among the most widely used BNPL services, Affirm ties for second along with Afterpay, with 12 percent of Americans having used at least one of the two. Sixteen percent of Americans have used PayPal Pay in 4/Pay Later and 11 percent have used Klarna.
The Pay in 4 plan is Affirm’s version of BNPL. For purchases of $50 to over $1,000, you can make four payments over time, with two weeks between each payment. You’re not charged interest or fees, and there’s no credit hit to apply.
Until now, Affirm has listed “4 interest-free payment plans” under the list of things that won’t affect your credit score on its website. That’s changing with Experian and TransUnion.
What is a credit bureau?
Experian and TransUnion are two of the three major credit bureaus that collect data including on-time or missed payments, outstanding balances, hard credit inquiries and account statuses. This information makes up your credit report.
The credit bureaus share your data with credit-scoring companies like FICO and VantageScore. That’s how you — and potential lenders — get the three-digit number between 300 and 850 that indicates your creditworthiness.
Affirm loan information began appearing on Experian credit reports on April 1, 2025, and can be viewed by creating a free Experian membership. Your Affirm activity will appear on your TransUnion credit report starting May 1, 2025.
“Greater transparency in buy now, pay later activity is key to helping consumers build their credit histories and supporting responsible lending,” says Scott Brown, group president, financial services of Experian North America, in a press release.
“Millions of consumers use Affirm’s pay-over-time financing and they deserve to get credit for their payment behavior,” says Steve Chaouki, president, U.S. Markets and Consumer Interactive of TransUnion, in a press release.
How does buy now, pay later affect your credit score?
Historically, BNPL has had minimal impact on borrowers’ credit scores.
The most common BNPL plans, like Affirm’s Pay in 4, usually only request a soft credit inquiry for approval, which doesn’t affect your score. That’s different from things like credit card, personal loan and auto loan applications, which tend to pull hard credit checks that temporarily ding your score.
And while longer-term loans from Affirm and other BNPL lenders tend to be reported to the credit bureaus, the short-term payment plans often aren’t. The CFPB explains one exception — if you don’t repay a BNPL plan, it might be turned over to a debt collector, which is then reported to the bureaus and hurts your credit score.
Buy now, pay later could help borrowers build credit
For poor-or-no-credit borrowers who opt for BNPL because they don’t qualify for traditional credit, there’s been a missed opportunity to build their credit score. The new reporting of Affirm’s Pay in 4 is a chance to improve your Experian and TransUnion credit reports.
For example, if you make four on-time payments with a BNPL plan, that positive payment history shows up on your credit report. While traditional credit-scoring models don’t yet look at this data, future models might. Earlier this year, a FICO study showed that incorporating Affirm’s BNPL data into a credit file could increase some borrowers’ FICO scores.
And good credit makes it easier to get approved for future lines of credit, housing, better loan terms and more.
On the flip side, missed BNPL payments could end up negatively impacting your credit score. It’s important to use BNPL plans as responsibly as you should any other form of credit.
Who uses buy now, pay later?
Bankrate reports that more than half of millennials (55 percent) and Gen Zers (51 percent) have used a BNPL service. That’s compared to 31 percent of Gen Xers and 25 percent of baby boomers.
BNPL is an option for spenders who may not want to fork over a chunk of change all at once but can’t qualify for a credit card or afford high interest charges. The most popular reason given for using BNPL was spreading out cash flow (50 percent), followed by low or no interest rate (37 percent), knowing exactly what’s owed and for how long (33 percent) and ease of obtaining credit (27 percent).
Surprisingly, BNPL usage is fairly consistent across income levels. It seems the service’s widespread accessibility to borrowers of all ages, incomes and credit scores has made it a major player in the payment world.
The bottom line
Buy now, pay later services have been fast moving when it comes to lending but slow moving when it comes to credit reporting. Affirm’s announcement to start reporting all pay-over-time activity, including Pay in 4, to Experian and TransUnion is a stepping stone toward BNPL users’ payment history becoming part of their creditworthiness. Just keep in mind that the flip side is also true — irresponsible BNPL use could end up hurting your credit.
You can check out your free credit report from Experian and TransUnion to see new BNPL transactions and check for any errors.
FICO Unveils Groundbreaking Credit Scores That Incorporate Buy Now, Pay Later Data
FICO has launched two new credit scores that incorporate Buy Now, Pay Later (BNPL) data. BNPL loans are playing an increasingly important role in consumers’ financial lives. The new scores provide lenders with greater visibility into consumers’ repayment behaviors, enabling a more comprehensive view of their credit readiness which ultimately improves the lending experience. FICO’s initiative to include BN PL data in credit scoring is a progressive step that acknowledges the evolving landscape of consumer financing, said Julie May, vice president and general manager of B2B Scores at FICO. The scores will initially each be offered side-by-side with existing versions of the FICO® Score, at no additional fee from FICO, and are expected to be available in the Fall of 2025. For more information visit FICO Score | FICO Credit Score |FICO.com/corporation/fico-com/news/stories/fICO-score-10-bnpl-enhanced-credit-score.
As key additions to the FICO Score 10 Suite, the BNPL versions of FICO® Score 10 are poised to further enhance financial inclusion by applying FICO’s innovative approach to incorporating BNPL data along with mainstream credit reports. Share
As key additions to the FICO Score 10 Suite, the BNPL versions of FICO® Score 10 are poised to further enhance financial inclusion by applying FICO’s innovative approach to incorporating BNPL data along with mainstream credit reports. These scores provide lenders with greater visibility into consumers’ repayment behaviors, enabling a more comprehensive view of their credit readiness which ultimately improves the lending experience.
“Buy Now, Pay Later loans are playing an increasingly important role in consumers’ financial lives,” said Julie May, vice president and general manager of B2B Scores at FICO. “By expanding our FICO Score 10 Suite with new models designed to incorporate BNPL data, we’re enabling lenders to more accurately evaluate credit readiness, especially for consumers whose first credit experience is through BNPL products. This innovation also supports our mission to expand financial inclusion by helping more consumers gain access to credit.”
FICO Score® 10 BNPL and FICO Score 10 T BNPL were developed to harness the benefits offered by the incorporation of consumers’ BNPL data into calculation. FICO’s year-long joint study on BNPL data confirmed that 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 borrowers.
In developing these new scores, FICO sought input from many of the largest lenders in the U.S., who recognized the need for a modern scoring model that includes BNPL data. Across this group, there was broad consensus: integrating BNPL data into credit scoring is a critical advancement that allows lenders to make more informed, accurate decisions while responsibly expanding credit access.
“Our clients tell us that FICO’s initiative to include BNPL data in credit scoring is a progressive step that acknowledges the evolving landscape of consumer financing,” added May. “By capturing a broader view of consumer credit behavior, lenders believe they can make more informed decisions, ultimately benefiting both the industry and consumers.”
FICO® Score 10 BNPL and FICO® Score 10 T BNPL will initially each be offered side-by-side with existing versions of the FICO® Score, at no additional fee from FICO. This approach allows lenders to evaluate the new BNPL-enhanced credit scores while continuing to use FICO’s industry-leading models they use today, ensuring a seamless transition and added value.
FICO® Score 10 BNPL and FICO® Score 10 T BNPL is expected to be available in the Fall of 2025. For more information visit FICO Score | FICO Credit Score | FICO.
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 80 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 90% of top US lenders, is the standard measure of consumer credit risk in the US and has been made available in over 40 other countries, improving risk management, credit access and transparency.
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Source: https://www.timesfreepress.com/news/2025/jul/06/personal-finance-fico-meets-buy-now-pay-later/