Buy Now, Pay Later Adoption Nears a Record, and Its Growth Is Hiding From Credit Files

A credit score works because it gathers everything a person owes into a single picture. Buy now, pay later has quietly grown into the exception to that rule. About 15% of active cardholders used an instalment plan in the second quarter of 2026, close to a record high, and almost none of that borrowing reaches the files lenders depend on. Consumer Edge, which released its Q2 figures on 23 July, found the growth landing hardest on the households already under the most pressure, which is where a blind spot in the data does the most harm.

Where the growth is concentrating

The headline held steady while the mix beneath it moved. Households with children reached about 19% adoption, against roughly 12.5% for those without, and their year-on-year growth accelerated while most other groups eased. Renters used instalment plans at about 23%, well ahead of the 13% among homeowners, a gap Consumer Edge ties to thinner savings and narrower access to mainstream credit. The income data makes the pattern sharpest, where the tier earning under $40,000 a year was the only band to speed up, even as the highest earners, above $150,000, grew slowest at 0.9 percentage points.

British regulators reached the same worry from another direction when they rewrote the rules to make shoppers treat it as debt again. The American quarterly figures point the same way, with adoption strongest among the young, the low-paid and the housing-insecure, and weakest among the comfortable.

The borrowing the credit system cannot see

The debt does not stop mattering once the sale clears. Most buy now, pay later loans never reach the credit bureaus. Providers furnish data inconsistently, some to a single bureau, some only once a borrower falls behind, and many not at all. The obligations sit outside the file that mortgage and card lenders price against, the same blind spot that let risk go unpriced in the software loans the Bank for International Settlements flagged this month.

The New York Federal Reserve estimates outstanding BNPL balances above $400 billion, most of it absent from the official debt totals. The practical effect shows up where credit decisions get made. America's Credit Unions asked the Department of Housing and Urban Development in 2025 to weigh this hidden borrowing in mortgage underwriting, warning that unreported instalments distort a borrower's debt-to-income ratio. The Consumer Financial Protection Bureau has found that BNPL users skew younger and lower-scoring, and that instalment providers approve close to 78% of applicants with subprime files, so a household can look unburdened on paper while carrying a stack of instalments no lender can see.

What the option still does for the people using it

The product answers a real need on its own terms. Splitting an essential purchase into fixed instalments lets a household with a thin credit file manage timing without a revolving balance, which is why so much of the growth across fintech providers comes from people the card market underserves. Citizens Advice in the United Kingdom has found a share of users reaching for it to cover groceries, closer to necessity than indulgence. Assessments of the wider risk, including Federal Reserve research, have judged the direct threat to financial stability limited at the product's present scale.

The visibility gap is also starting to close. FICO, the credit-scoring firm Fair Isaac Corporation, launched two models in 2025 that fold instalment data into a score for the first time, and Affirm began furnishing its loans to the major bureaus. Adoption is gradual and most providers still do not report, so the picture will sharpen over time rather than at once. The direction runs toward instalment debt that lenders and regulators can finally read.

Why the composition is the real signal

The Consumer Edge numbers earn their weight once the two halves sit together. The households driving the growth, families with children, renters and the lowest earners, are the same households whose borrowing the credit system records least completely. That concentration has a consequence. The official credit picture understates strain in exactly the place strain is rising fastest, and a dataset that watches spending directly can register that pressure months before it reaches a delinquency rate or a credit score.

A credit score is meant to show what a household owes. It shows almost nothing about the borrowing that now grows fastest among the people with the least room to spare. A private spending dataset can read that pressure earlier than the credit file can, which is why this quarter's figures deserve more weight than the steady headline they arrived under.

Editor's note

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