Find out more about “buy now, pay later” options and your credit score. Have you heard of Afterpay and wondered how it can affect your finances or credit health? [Duration- 2:17].
Yo, what’s up, credit-conscious peeps! Ever wondered if using Afterpay, the hottest name in the buy-now-pay-later (BNPL) game, leaves a mark on your precious credit score? Well, buckle up, because we’re about to dive deep into the world of Afterpay credit checks and how they impact your financial standing.
The Lowdown on Afterpay Credit Checks: Soft vs. Hard
First things first, let’s clear the air on the two types of credit checks:
- Soft checks: These are like peeking through a window – they allow companies to see your credit history without leaving a mark. Think of it as a casual credit inquiry, no biggie.
- Hard checks: These are more like barging into your credit report and leaving a footprint. Hard checks are typically done when you apply for a loan or credit card, and they can impact your credit score for up to two years.
Now, the million-dollar question: does Afterpay do a hard credit check?
The answer is a resounding NO, Afterpay uses soft credit checks to assess your eligibility for an account, This means you can breathe a sigh of relief knowing your credit score won’t take a hit just for signing up,
But hold your horses, there’s a twist. If you opt for the “pay monthly” feature at checkout, Afterpay might perform a hard credit check. This is because the pay monthly option essentially turns your purchase into a mini-loan, and lenders need to assess your creditworthiness before handing over the cash.
The Impact of Afterpay on Your Credit Score: Friend or Foe?
The question is, does using Afterpay really improve or worsen your credit score? The answer is complex, as are most things in life.
Positively, Afterpay can help you establish a positive credit history by reporting your on-time payments to credit bureaus. This is especially helpful if your credit file is thin or you are new to credit.
However, if you miss payments or default on your Afterpay account, it can negatively impact your credit score Late payments and defaults are like red flags to lenders, indicating that you might be a risky borrower.
The bottom line? Using Afterpay responsibly can actually boost your credit score. But if you’re prone to forgetting payments or overspending, it might be best to steer clear.
Frequently Asked Questions (FAQs) about Afterpay and Credit Checks
1. Does Afterpay check your credit score every time you make a purchase?
Nope, they only run a credit check when you first open an account and select “pay monthly” at the point of sale.
2. Can I use Afterpay if I have bad credit?
It’s possible, but it’s not guaranteed. When determining your eligibility, Afterpay takes into account a number of factors, such as your income, employment status, and credit history.
3. What happens if I miss an Afterpay payment?
Late payments can incur fees and negatively impact your credit score. To prevent any unpleasant surprises, be sure to prioritize your Afterpay payments and set reminders.
4. Can I close my Afterpay account and remove it from my credit report?
Yes, you can close your Afterpay account at any time. However, closed accounts can still remain on your credit report for up to 10 years.
Additional Resources for the Credit-Savvy Crowd
- Afterpay Help Center: https://help.afterpay.com/hc/en-us
- Experian Credit Education: https://www.experian.com/blogs/ask-experian/
- Equifax Credit Report Information: https://www.equifax.com/personal/education/credit-report-information/
Remember, peeps, knowledge is power when it comes to managing your credit. By understanding how Afterpay credit checks work and their potential impact on your score, you can make informed decisions about using this popular BNPL service.
Stay financially savvy, and keep on rockin’ those credit goals!
How could Afterpay or other buy now, pay later services affect your credit?
The answer will depend heavily on the BNPL servicer you choose to apply for.
Many BNPL plans don’t even perform a credit check; instead, they just perform a soft inquiry on your credit report to assess your eligibility. Therefore, in these circumstances, applying for a BNPL service is unlikely to have an effect on your credit report or credit score. However, every BNPL servicer is different. Always carefully review the terms of any BNPL service before applying.
Certain BNPL services may choose to report information to a limited number of consumer reporting agencies (CRAs) or may not report payment information at all. However, the way BNPL payments are reported is still developing.
Equifax became the first CRA to formalize a standard process for reporting BNPL services on credit reports. An analysis of anonymized consumer data from a provider of bank owned parcels (BNPLs) revealed that customers who made on-time loan payments benefited from having BNPL payments recorded in their credit history. Equifax encourages BNPL providers to report credit information, in an effort to reward consumers for positive repayment habits.
What is Afterpay? How does Afterpay work?
*Equifax is not affiliated with nor endorsing Afterpay, Klarna or Affirm in this article.
One of the numerous instances of financial technology companies providing online shoppers with “buy now, pay later” (BNPL) services is Afterpay. These payment plans, as the name implies, let customers buy things now and spread out the payments over time. In most cases, the payment plan is split into four equal payments. The first payment is made at the time of purchase, and the next three are deducted from the debit or credit card associated with your BNPL account every two weeks.
Afterpay, Klarna, Affirm and other BNPL payment options can make it easier to buy online. But its important to know how BNPL services could affect your credit report and credit score.