How to get rid of "buy now, pay later" debt before it impacts your credit

BNPL debt can damage your credit, so it's important to deal with what you owe now. OlekStock/Getty Images

Buy now, pay later (BNPL) services have exploded in popularity over the last few years. While these payment plans were once seen as a convenient way to stretch payments for big-ticket items, in today's tough economic landscape, they are being used by borrowers for everything from groceries to medical bills. And, the results of that trend are troubling. According to a new survey from LegalShield, about 76% of Americans have used a BNPL plan to finance a purchase, and nearly half of the borrowers who've used them have already missed a payment. 

So, for many borrowers, what may have started as an easy way to manage cash flow has turned into a juggling act that they're struggling to maintain. And, with the changes to how BNPL plans are handled by credit scoring agencies, these missteps now come with real consequences. FICO announced earlier this year that it will start factoring BNPL loan data into credit scores this fall, which means missed BNPL payments or high balances could lower your scores. But awareness of these changes is low: 38% of BNPL users say they haven't heard about them. 

If you're one of the millions managing a BNPL plan, now is the time to try and get rid of that debt. Below, we'll detail how you can do just that.

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How to get rid of buy now, pay later debt before it impacts your credit

Given the changes that are coming to how BNPL impacts your credit score, it's important to try and pay off what you owe now. And, that process starts with knowing exactly what you still owe. To determine this, make a list of every BNPL account you have open, along with the balance, due dates and any fees. Once you have the full picture, you can take proactive steps to get rid of the debt and protect your credit. Here's how to tackle your BNPL debt strategically:

• By consolidating it: One of the easiest ways to get rid of your BNPL debt is to roll multiple accounts into one low-rate personal loan. This simplifies payments and can reduce late fees and financial stress.
• By transferring the balance: While the process can be a bit trickier, you may have the option to transfer your BNPL balances to a card with a 0% introductory APR, which will pause interest accumulation and buy you time to pay down the debt. Be mindful of the restrictions related to your balance transfer card, though, and be sure to factor in any transfer fees, too.
• By adding it to a debt management plan: A certified credit counselor can help you create a personalized repayment plan based on your income and financial obligations that includes your BNPL debt. This could lower your rates and fees and make it easier to pay off what's owed.
  
• By taking a strategic DIY approach: You also have the option to use the snowball approach (paying off the smallest balances first) for momentum, or the avalanche method (tackling the highest-risk accounts first) to save money and prevent credit damage.

By using or combining these strategies, you'll have a better chance at regaining control of your BNPL debt before FICO's new scoring system has an impact on your credit.

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Why buy now, pay later plans can be dangerous for your finances

BNPL was originally marketed as a financial convenience, but the risks are mounting, in large part because many users underestimate how quickly multiple small payments add up. LegalShield's survey found that two-thirds of BNPL users manage multiple loans at once, and 62% of those have more than five that are simultaneously active.

The biggest danger, though, is often the illusion of affordability. Breaking a $200 purchase into four $50 payments makes it feel more manageable, but it doesn't change the fact that you're spending money you don't currently have. When you multiply this across multiple platforms and purchases, you can quickly find yourself committed to dozens of future payments that strain your budget.

And, the late fees and penalties can be particularly brutal. While these services often market themselves as interest-free alternatives to credit cards, missing payments can trigger hefty fees with every occurrence. When you're managing multiple accounts, these fees could add up faster than credit card interest would have.

Perhaps most troubling, though, is how these services can mask underlying financial problems. When you're using BNPL to pay for basic necessities like groceries and medical bills, it's often a sign that your budget is already stretched too thin. Rather than addressing the root cause, whether it's insufficient income, excessive expenses or a lack of emergency savings, BNPL can enable you to maintain poor spending patterns.

The bottom line

Buy now, pay later services started as a convenient alternative to credit cards, but they're rapidly evolving into a potential credit score liability. And, with FICO's upcoming changes, the stakes are even higher for the millions of Americans currently using these platforms, as the window to clean up your BNPL debt before it impacts your credit score is closing fast. 

So, take inventory of your accounts, prioritize payoffs and consider this a wake-up call to reassess your relationship with these services. While they can be useful tools when used sparingly and paid off quickly, the data shows that many Americans are using them as a crutch for budget shortfalls rather than genuine convenience.