More Pay-In-4

Dear Dr. Per Cap:

Earlier this year, you wrote about the credit bureaus now including payments made on pay-in-4 loans on credit reports. However, I’ve paid back four Affirm loans this year for online purchases and my credit score hasn’t budged a point. What gives?


Wise Borrower

Dear Wise Borrower,

Thank you for sharing. Let’s remember that pay-in-4 or point-of-sale loans allow shoppers to make small purchases with payments. Hugely popular in stores and online checkouts, the loans are similar to old-school layaway plans except you get the product right away instead of waiting until you’ve made all the payments.

I indeed wrote about how the credit bureaus now allow point-of-sale loans, often referred to as buy now, pay later loans, to be included on credit reports. In fact, all three major credit bureaus – Equifax, Experian, and TransUnion ─ have adopted this policy.

However, many of the big-name point-of-sale lenders like Klarna, Afterpay, and Affirm have yet to follow through and actually report these consumer loans to the credit bureaus.

Why is that?

Their concern is over the way point-of-sale loans are structured, which could hurt a borrower’s credit score more than help it. We must remember that the credit scoring system is based on an old way of doing business when most loans were long-term commitments – like car loans and home mortgages. As a result, the scoring models are designed to reward long term loans.

However, point-of-sale loans are a completely different animal. People often open and close multiple point-of-sale loans in a short period of time. And even if paid back on time, the current FICO credit scoring models can ding a person’s score because they might interpret point-of-sale plans as churning loans, as opposed to responsible borrowing.

So what is happening is that the point-of-sale loan companies are running a little scared right now while leaning on the credit bureaus and FICO to come up with a better way to report and measure point-of-sale loans so they don’t hurt customers’ FICO scores. Which, of course, could mean less business from fewer customers using point-of-sale loans.

Hopefully, the credit bureaus, FICO, and the point-of-sale companies will figure out a healthy compromise in the not-so-distant future that works for consumers.

Until then, don’t look to point-of-sale loans as a way to boost your FICO score.


Ask Dr. Per Cap is a program funded by First Nations Development Institute with assistance from the FINRA Investor Education Foundation. For more information, visit To send a question to Dr. Per Cap, email