Buy now, pay later (BNPL) apps have risen to prominence in recent years, particularly during the COVID-19 pandemic lockdown period – reportedly adding as many as 20,500 customers each day.
In fact, since this time in 2019, Afterpay – Australia’s premier BNPL service – has doubled the number of users with accounts on the platform.
But do services such as Afterpay and its competitors, including Zip, impact your credit score?
Like most things, the answer isn’t completely simple, but it can be summed up generally as such – BNPL platforms are credit neutral so long as you meet your repayments and use them wisely.
This isn’t ground-breaking information, but it’s information many users haven’t worked out on their own. It’s reported that, specific to Afterpay, some 15% of revenue is acquired through late fees.
The common thread among all BNPL services was that if you miss a payment or default on a purchase, then most have the right, and in some cases, the responsibility, to report this to a credit agency.
So, while you don’t need to delete your account or stop using the service to, say, apply for a home loan, it is important to ensure you never use the service for payments you cannot make.
If you often miss repayments or have previously defaulted, a lender could look at this and see you as an untrustworthy borrower, just as they would if you had a history of reckless spending, too much debt, or a low income with poor savings history.