Press release
FICO and Affirm Unveil Industry-Leading Analysis of ‘Buy Now, Pay Later’ Loans
First-of-its-kind analysis finds Affirm customers with multiple BNPL loans would be most likely to experience score increases with FICO’s innovative
About this update from Affirm Holdings, Inc.
[{"type":"text","content":"\nFirst-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\n\n\n BOZEMAN, Mont.--(BUSINESS WIRE)--\nFICO (NYSE: FICO), global analytics software leader, today released key guidance and takeaways from a study that analyzed the impact of including ‘Buy Now, Pay Later’ (BNPL) loans in a consumer’s FICO® Score.\n\n\nFICO 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.\n\n\nThe 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.\n\n\n“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.”\n\n\nA 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 separa...