Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

FICO to incorporate buy-now-pay-later loans into credit scores

axios.com

Post reply on HN
Print view View original

71–80 of 690 posts

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#71

Post by Tadpole9181 »

janalsncm wrote: post #52

What is the functional difference between BNPL and credit cards that can explain why it’s become popular? A credit card is literally “buy now pay later” so is it just the ease of onboarding?

BNPL is 0% interest over N months. A credit card is 20% APY over the total balance over minimum payment. And it's offered by my CC providers.

For some larger purchases on a 12 month plan, leaving the money in savings loses me 1.5% cash back but gains me around 3% interest (after accounting for the depleting principle).

It would be stupid not to do it sometimes. I don't really get the financer's benefit. Though maybe it's because I do pay it, and if I didn't there would be 200% APY or something.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#72

Post by goldfishgold »

PostOnce wrote: post #13

Theoretically, credit should be used for one thing: to make more money. (not less) However, instead of using it to buy or construct a machine to triple what you can produce in an hour, the average person is using it to delay having to work that hour at all, in exchange for having to work an hour and six minutes sometime later. At some point, you run out of hours available and the house of cards collapses. i.e., credi…

One flaw with this reasoning is that ignores the time value of money. A dollar today is worth more than a dollar a hundred years from now, if only because we’ll all be dead a hundred years from now. From that perspective and with favorable terms it can make sense to sell the future to buy the present, if someone is willing to take that trade.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#73

Post by sorcerer-mar »

clipsy wrote: post #53
gottorf wrote: post #38

Earlier quoted context omitted.

> credit is the only way they're surviving on something close to minimum wage. Or credit was the only "safety net" they had during a rough time In my experience, the average American has no concept of saving money, and those below average even less. It's funny to me that America gets flak from all over the world for having no social safety net; if this was actually true, you'd expect to see people put aside a bit of…

> It's funny to me that America gets flak from all over the world for having no social safety net; if this was actually true, you'd expect to see people put aside a bit of their income, however meager it may be, out of an expectation that they will need it. Congratulations, you've just discovered that human beings are not perfect rational actors.

Economists hate this one weird trick!

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#74

Post by sodality2 »

CPLX wrote: post #29
sodality2 wrote: post #15

Earlier quoted context omitted.

I always thought it was interesting that the BNPL loans’ interest is subsidized by the retailer, which pay the premium in order to improve the chance of a sale (hoping to hone in on those who can’t afford it now and make it back on that extra spend). Which means high credit score, wealthy spenders could put everything they can on BNPL plans and profit the (minuscule) interest over time, but if you can do that on big…

This is a theory, but it flies directly in the face of reality which is that nearly every retailer on the planet would prefer more wealthy customers.

Eh, in the same way a lot of retailers offer student discounts, they want to meet everyone at their maximum spending limit to capture more of the demand curve. It doesn’t have to be one or the other; not offering BNPL loans to wealthy customers aren’t likely to tangibly affect sales of that group.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#75

Post by Tadpole9181 »

SoftTalker wrote: post #69
scarface_74 wrote: post #62

Earlier quoted context omitted.

Fixed payment schedule and no interest being charged.

For most of them, interest accrues from the date of purchased but is not charged if you pay on time. If you don’t, you owe all the back interest from day one.

Ah, that's the scam. Yet another poor tax, then? The rich get interest on money they already spent, the poor get an illusion of safety followed by even more destitution?

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#77

Post by UltraSane »

dh2022 wrote: post #33
UltraSane wrote: post #23

Earlier quoted context omitted.

If customers make every payment their score should improve.

What is the benefit for a consumer to use this type of loan and then pay it back on time versus using a credit card and then paying the card back on time? To me this seems like a new product that would target a different consumer than the one that makes payments on time. But I would like if someone challenges this view. Thanks!

Lower interest because the seller pays the interest

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#78

Post by Tadpole9181 »

dh2022 wrote: post #33
UltraSane wrote: post #23

Earlier quoted context omitted.

If customers make every payment their score should improve.

What is the benefit for a consumer to use this type of loan and then pay it back on time versus using a credit card and then paying the card back on time? To me this seems like a new product that would target a different consumer than the one that makes payments on time. But I would like if someone challenges this view. Thanks!

A CC gives 1% cash back. Your bank's savings give 4% interest. BNPL doesn't earn the cash back, but over a long term you make more in interest for some purchases.

For small puchases with short repayment periods? Not a clue.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#79

Post by msgodel »

clipsy wrote: post #53
gottorf wrote: post #38

Earlier quoted context omitted.

> credit is the only way they're surviving on something close to minimum wage. Or credit was the only "safety net" they had during a rough time In my experience, the average American has no concept of saving money, and those below average even less. It's funny to me that America gets flak from all over the world for having no social safety net; if this was actually true, you'd expect to see people put aside a bit of…

> It's funny to me that America gets flak from all over the world for having no social safety net; if this was actually true, you'd expect to see people put aside a bit of their income, however meager it may be, out of an expectation that they will need it. Congratulations, you've just discovered that human beings are not perfect rational actors.

I mean I guess they get some perceived value out of the rims that makes the stability trade off worth it.

Re: FICO to incorporate buy-now-pay-later loans into credit scores

#80

Post by crazygringo »

Jcampuzano2 wrote: post #51
crazygringo wrote: post #32

Earlier quoted context omitted.

> Theoretically, credit should be used for one thing: to make more money. I disagree. You use credit to buy a car or buy a house when you don't have the cash to buy them up-front. It's not so you can use them to make money, it's so you can use them to enjoy life . > At some point, you run out of hours available and the house of cards collapses. Only if you go too far. The point is to buy things knowing what they'll c…

If you're using credit to buy a car, most people do so in order to get to and from their place of work for the majority of their driving time. In that way, using credit to buy a car still fits into their theoretical model. For example I know plenty of people who completely got rid of their cars when remote work became more common, or at the very least consolidated to smaller cars or to less cars for a family. Similar…

No. You can rent and you can take the bus. Or rent and buy a crazy cheap old used car.

A house and a decent car are not primarily about making money. They're about your quality of life.

> And all recommend not using credit cards and instead an emergency fund if you lose your job.

And if you already used your emergency fund on, say, a medical emergency...?

Post reply on HN