Responsible Innovation: Why Data Matters in Credit Reporting
Credit scores have become a cornerstone of financial life in America, acting as a powerful three-digit number that can dramatically shape an individual's economic opportunities. Far beyond just determining loan eligibility, these scores impact everything from interest rates and insurance premiums to housing options and even employment prospects. For the average American, understanding and maintaining a good credit score isn't just about financial health—it's become a component of overall well-being in modern society. But what if the credit scoring system wasn’t able to ensure that responsible repayments on loans positively influenced someone’s credit score?
Recent industry announcements in the U.S. about Buy Now, Pay Later (BNPL) credit reporting have sparked important discussions about the future of consumer credit access and consumer data. Afterpay does not currently report to credit bureaus in the United States, and we won't until we see concrete evidence that BNPL data reflecting responsible payment behavior will help, not hurt, the credit scores of our customers.
We recently published a white paper, "A Modern Approach to Credit", which highlights:
- The traditional credit system was built around outdated products and assumptions. It struggles to adapt to new forms of financial behavior – even when those behaviors reflect strong financial health. This is seen in a recent simulation done with Cash App Borrow (a small dollar loan offering) in partnership with a major bureau and a leading analytics provider.
- Credit reporting, scoring, and interpretation still largely operate under legacy frameworks, and full system modernization could take another decade or more. By then, financial behaviors may have evolved again – and a new generation of consumers will still be underserved by a system that wasn’t built for them.
- Financial health should be measured through real behavior: how someone earns, saves, spends, and repays.
- Regulatory frameworks that recognize the value of alternative data sources, such as near real-time transaction data and spending behaviors, as integral components of credit decision-making are critical. This approach aligns with modern data capabilities and helps reduce the likelihood that creditworthy borrowers are unjustly denied access to financial opportunities.
Careful consideration of credit reporting is crucial, as finding a way to positively impact the scores of BNPL customers who are responsibly using the product could greatly improve access to the financial system for millions. While credit reporting might seem like a quick fix, we believe responsible innovation requires a more nuanced approach and deserves careful study before implementation.
Don’t get us wrong, we’re deeply interested in working with credit bureaus and scoring agencies to find a proven solution for positive repayment behavior to benefit our customers – but first, we need to see comprehensive research and clear positive outcomes before adding customer data to credit reports.
Why Customer Outcomes Drive Our Decisions
The numbers tell a compelling story about why we prioritize customer protection over industry trends. Afterpay demonstrates that modern underwriting can expand access while managing risk effectively – internal models consistently outperformed traditional credit scores in predicting repayment, allowing approval of 13% more customers while maintaining loss rates below 1% (Represents Afterpay Pay-in-Four loss rates through Q1 2025).
In fact, 98% of Afterpay purchases incur no late fees and 95% of installments are paid on time. This demonstrates our commitment to responsible lending and strong customer outcomes. The data also aligns with recent findings from CFPB economists, whose research shows that consumers repaid their BNPL loans 98% of the time. This independent validation of what we've observed in our own data reinforces our belief that responsible BNPL products can serve customers effectively without immediate credit reporting.
When it comes to credit reporting, at Afterpay we've established clear guardrails:
- We want to see clear evidence of positive customer outcomes before sharing customer data, specifically when we see customers paying on time, their scores should be influenced positively.
- The credit reporting system needs to prioritize customer data control, transparency, and accuracy.
- We’d like to see credit scoring frameworks accurately reflect overall financial health in near real-time.
The Path Forward
The decision to report credit data isn't just a technical choice – it's a decision that could affect millions of people's financial futures. Our global experience, including positive results in markets like New Zealand, gives us valuable insights. However, we recognize that markets differ significantly, and we need to understand the specific implications for U.S. consumers before implementing similar practices here.
The success of our borrowers – demonstrated by our strong portfolio performance without traditional credit reporting – is the strongest testament to what's possible when building financial products that truly work for everyone. We are looking forward to a day where BNPL customers with strong repayment history are rewarded with improvements to their credit score, helping to further unlock the financial system – but that is not today.
As the BNPL industry evolves, we'll maintain our customer-first approach, making decisions based on evidence rather than industry pressure. Because at Block, we believe that financial innovation should be rooted in economic empowerment.
Credit scores have become a cornerstone of financial life in America, acting as a powerful three-digit number that can dramatically shape an individual's economic opportunities. Far beyond just determining loan eligibility, these scores impact everything from interest rates and insurance premiums to housing options and even employment prospects. For the average American, understanding and maintaining a good credit score isn't just about financial health—it's become a component of overall well-being in modern society. But what if the credit scoring system wasn’t able to ensure that responsible repayments on loans positively influenced someone’s credit score?
Recent industry announcements in the U.S. about Buy Now, Pay Later (BNPL) credit reporting have sparked important discussions about the future of consumer credit access and consumer data. Afterpay does not currently report to credit bureaus in the United States, and we won't until we see concrete evidence that BNPL data reflecting responsible payment behavior will help, not hurt, the credit scores of our customers.
We recently published a white paper, "A Modern Approach to Credit", which highlights:
- The traditional credit system was built around outdated products and assumptions. It struggles to adapt to new forms of financial behavior – even when those behaviors reflect strong financial health. This is seen in a recent simulation done with Cash App Borrow (a small dollar loan offering) in partnership with a major bureau and a leading analytics provider.
- Credit reporting, scoring, and interpretation still largely operate under legacy frameworks, and full system modernization could take another decade or more. By then, financial behaviors may have evolved again – and a new generation of consumers will still be underserved by a system that wasn’t built for them.
- Financial health should be measured through real behavior: how someone earns, saves, spends, and repays.
- Regulatory frameworks that recognize the value of alternative data sources, such as near real-time transaction data and spending behaviors, as integral components of credit decision-making are critical. This approach aligns with modern data capabilities and helps reduce the likelihood that creditworthy borrowers are unjustly denied access to financial opportunities.
Careful consideration of credit reporting is crucial, as finding a way to positively impact the scores of BNPL customers who are responsibly using the product could greatly improve access to the financial system for millions. While credit reporting might seem like a quick fix, we believe responsible innovation requires a more nuanced approach and deserves careful study before implementation.
Don’t get us wrong, we’re deeply interested in working with credit bureaus and scoring agencies to find a proven solution for positive repayment behavior to benefit our customers – but first, we need to see comprehensive research and clear positive outcomes before adding customer data to credit reports.
Why Customer Outcomes Drive Our Decisions
The numbers tell a compelling story about why we prioritize customer protection over industry trends. Afterpay demonstrates that modern underwriting can expand access while managing risk effectively – internal models consistently outperformed traditional credit scores in predicting repayment, allowing approval of 13% more customers while maintaining loss rates below 1% (Represents Afterpay Pay-in-Four loss rates through Q1 2025).
In fact, 98% of Afterpay purchases incur no late fees and 95% of installments are paid on time. This demonstrates our commitment to responsible lending and strong customer outcomes. The data also aligns with recent findings from CFPB economists, whose research shows that consumers repaid their BNPL loans 98% of the time. This independent validation of what we've observed in our own data reinforces our belief that responsible BNPL products can serve customers effectively without immediate credit reporting.
When it comes to credit reporting, at Afterpay we've established clear guardrails:
- We want to see clear evidence of positive customer outcomes before sharing customer data, specifically when we see customers paying on time, their scores should be influenced positively.
- The credit reporting system needs to prioritize customer data control, transparency, and accuracy.
- We’d like to see credit scoring frameworks accurately reflect overall financial health in near real-time.
The Path Forward
The decision to report credit data isn't just a technical choice – it's a decision that could affect millions of people's financial futures. Our global experience, including positive results in markets like New Zealand, gives us valuable insights. However, we recognize that markets differ significantly, and we need to understand the specific implications for U.S. consumers before implementing similar practices here.
The success of our borrowers – demonstrated by our strong portfolio performance without traditional credit reporting – is the strongest testament to what's possible when building financial products that truly work for everyone. We are looking forward to a day where BNPL customers with strong repayment history are rewarded with improvements to their credit score, helping to further unlock the financial system – but that is not today.
As the BNPL industry evolves, we'll maintain our customer-first approach, making decisions based on evidence rather than industry pressure. Because at Block, we believe that financial innovation should be rooted in economic empowerment.