Does Afterpay Affect Your Credit Score?
Buy Now, Pay Later (BNPL) services have grown in popularity over the years, giving customers the opportunity to have a flexible payment option for everyday use, some bills, and more expensive purchases. Afterpay has become a popular BNPL service for many as it is easy to use and offers flexible payments. But with many banking services and offers available, you will have questions including does afterpay affect your credit score?
Overview
- Factors that influence credit score
- Does Afterpay affect your credit score?
- Is there a downside to using Afterpay?
- What are the long term effects of using Afterpay?
- Using Afterpay FAQs
Factors that influence credit score
Common factors that influence credit score
- Credit checks
- Late or missed payments
- Defaults
Does Afterpay do credit checks?
One way that allows Afterpay to be an easy, popular payment service is that they legally do not have to do a credit check before approving new customers. Instead of credit checks, Afterpay offers new customers a lower spending limit to begin with. Depending on how well you manage the repayments, Afterpay will increase the spending limit as time goes on. This means almost anyone can be approved for Afterpay and have the opportunity to spend responsibly regardless of your credit history.
However, it’s important to note that Afterpay can run credit checks if they see fit and a hard check on your credit file will temporarily impact your credit score.
Does Afterpay report missed payments?
Missed payments are not currently given to any credit reporting bureau in Australia, which means your Afterpay will not affect your credit score. Be aware however, Afterpay could pause your account and provide late fees if you do not pay off the payments and haven’t supplied them with a reason as to why.
What happens if you don’t pay Afterpay debt?
Afterpay will pause your account after you have missed a payment. You will have to repay the full amount left over before Afterpay will give your account back to you. Once your account is released, you may also find Afterpay has limited your spending money in hopes that you will be able to repay in full next month.
You can contact Afterpay to explain your financial situation, but the easiest way to avoid debt is to simply:
- Pay it off in instalments
- Stick to a budget
- Defer your instalments to payday
Does Afterpay affect your credit score?
Does Afterpay give you bad credit?
Simple answer is no. Afterpay will not give you bad credit as this service is not currently connected to the credit report bureaus in Australia. So whatever happens with your Afterpay repayments, it will not affect your overall credit score.
That said, the rest of this blog will provide you with a more in depth understanding of how Afterpay works and if it is the right decision for you.
Is there a downside to using Afterpay?
Don’t forget that while it may seem that you have so much money in the bank, it’s easy to forget that you will eventually need to pay off all of your cards and loans. Especially when first getting a BNPL account, it’s easy to get carried away and purchase items that are way above what you can afford. This can lead to a big shock when it comes to repayments.
Like other financial services, you need to make sure you are spending responsibly and not overspending. One way to help manage payments better is to reduce your spend limit on Afterpay.
What are the long term effects of using Afterpay?
Using Afterpay as an alternative payment option sounds easy, accessible and a good option for right now. But make sure you factor in the long term ramifications of choosing to go with a BNPL service or credit card.
While Afterpay does not affect your credit score just yet, it could have a lasting affect on how your finances look in the future. Having too many debts to repay can add up quickly creating large bills and stress in the future. Especially if you also use other BNPL services, which might report payment information to credit bureaus. Juggling multiple payment services can make it hard to keep track of payments and may lead you to overdrawing your linked account.
On the other hand, you could be missing out on building a good credit score if you are managing your payments well.
Using Afterpay FAQs
Afterpay vs credit card?
| Afterpay | Credit Card | |
|---|---|---|
| Age requirement | Must be over 18 | Must be over 18 |
| Interest Rates | No interest | Set interest rate |
| Where to use it? | Selected retailers and selected bills | All retailers and all bills |
| Eligibility | Being at least 18 years of age | Being an Australian citizen or permanent resident |
| Having an Australian bank account or debit/credit card | Earning a regular income | |
| Providing Australian contact details | Providing details of income, assets, debts and regular expenses | |
| Payments | Pay off weekly, fortnightly or monthly in instalments | Pay in full or minium of 2% or $25 by the end of the month |
| Credit Check | No credit history link | Build good credit history |
| Impact credit score | No | Yes |
| Where to get one? | BNPL services have their own websites | All banks offer credit cards (T&C may vary between banks) |
Afterpay offers flexibility and wants to help their customers spend responsibility and reasonably. In a short term time frame, Afterpay will not affect your credit score but they can pause your account if you do not repay when the time comes.
Sometimes if a suitable reason is given as to why the payments haven’t come through, Afterpay can make other arrangements. Such as rescheduling the payment date or take half the payment now and extend the repayment term. However, like any other loan, it is important to stay up to date with repayments so future you isn’t in a bad financial position.
Does Afterpay have interest?
Afterpay does not charge interest on your purchases or payments. So if you are paying off an expensive item, you will not have to worry about the interest rate increasing throughout the time you are paying off a high end product. It does charge late fees if you miss a payment.
You could end up paying interest if your Afterpay account is linked to a credit card and not a debit card.
Does Afterpay affect getting a loan?
Financial hardship, whether it’s due to Afterpay or for other reasons, can also lead lenders and bankers to saying no to future loan requests. Borrowers who have a history of late fees, bad spending habits, and signing up to too many BNPL services may find themselves classed as ‘high risk’ by banks and lenders. High risk borrowers may experience a longer loan application process as lenders will likely go through all your financial records before making their decision.
Like Afterpay but want a better payment turnaround? Swoosh has you covered!
Afterpay and other BNPL services are popular alternatives to borrowing money in Australia. But, if you are looking for a longer term lending option for larger purchases, events or bills, check out our small loans and bad credit loans. Apply with our 100% online application process today.
