Equifax announced this month that payments on ''buy now, pay later'' (BNPL) loans would be added to credit reports next year.
The credit bureau is one of the largest in the U.S. and will begin recording BNPL installment plans on reports in early 2022, according to CNBC.
BNPL loans allow customers to pay for purchases in divided (typically four equal) installments rather than all at once and have recently exploded in popularity with companies such as Affirm and Afterpay.
Equifax said the addition would give lenders ''a fuller picture of people's financial commitments, like how much they owe on these plans,'' and could potentially increase consumer credit scores.
The company also argued that BNPL loans would help younger consumers build their credit history, as they do not typically require a hard pull.
A few issues do arise with the method, however. The Consumer Financial Protection Bureau issued a blog post about the loans in July warning of the often-overlooked risks.
''Just because you qualify for BNPL or any other credit product doesn't mean you should use it,'' the bureau stated.
''While many BNPL companies don't charge interest, most do charge late fees if you miss a payment,'' the post continued. ''In addition, you could be blocked from future purchases until you make past payments and could even have your debt sent to a debt collector if you fail to repay.''
BNPL loans are typically short and repaid within a few weeks. Consumers can open and close multiple BNPL loans simultaneously, making credit calculation difficult if abused, per CNBC.
In addition, there is often a lag between when people open an account and when it appears on their credit report, meaning consumers could repay something before it appears.
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