Buy Now, Pay Later

Can Buy Now Pay Later Financing Affect Your Credit?

When you are shopping, you might have been given the choice of buy now, pay later financing. Through such schemes, you can make your purchase right away and pay for it in installments. However, those with poor credit score often need help and time to improve so they don’t risk it when wondering can buy now pay later financing affect your credit score.

What Will We Talk About Here?
  • Equifax, Experian, and TransUnion are the three primary credit bureaus that receive credit score reports.
  • Your credit will have an impact if you select a service that files reports with any significant bureau.
  • If you’re having trouble making ends meet or saving money for emergencies, avoid buy now, pay later financing.

…and Much More!

Can Buy Now Pay Later Financing Affect Your Credit

Buy now, pay later loans typically have no impact on a buyer’s credit. These loans are frequently provided at the point of sale. They currently do not usually show up on most credit reports.

So, having a solid payment history on your buy now pay later accounts won’t help you establish credit. However, late payments usually don’t affect your credit until your account is turned over to the collectors.

However, things are changing! The three major credit bureaus, Equifax, Experian, and TransUnion, intend to add information regarding buy now, pay later loans to credit reports in coming days.

  • The service you select will determine whether buy now pay later loans are reported to credit bureaus.

If it reports, then the service does affect your credit. You can establish credit using more old methods in the intervening time. Get ready for the time when loans with a reliable buy now pay later option will influence your credit. 

Buy Now, Pay Later Financing – All You Need To Know

If a company pulls your credit report to accept your loan application, it may have an impact on your credit. It’s possible that some retailers who provide “buy now, pay later” financing won’t require you to submit an official credit application.

  • There won’t be a credit check or even an inquiry in that situation. 

Data including address reliability, public records, prior interactions with the lender, and banking information are considered in part to make approval choices.

How Buy Now Pay Later Financing Works

If they require your social security number either the whole number or the last four digits when applying, it means a credit check will be done. This is to determine whether to approve the application or not.

  • Your credit report receives a hard inquiry as a result of the credit check, which can lower your score by a few points.

Inquiries make up roughly 10% of the credit score. They are recorded on the credit report for the following two years, although they only have a 12-month impact on your score.

Benefits Of Adding Buy Now, Pay Later Loans To Credit Reports 

Credit bureaus promote buy now, pay later as a wonderful opportunity for consumers with little to no history of traditional credit to enter the credit mainstream. Companies that perform credit scoring are keen to use the additional information in their scoring systems.

It is likely to be advantageous for young customers and those with subprime credit to include buy now, pay later loans on credit reports. TransUnion‘s study shows that only 17% of people who use credit are between the ages of 18 and 30. This accounts for one-third of individuals applying for point-of-sale financing.

  • Additionally, 43% of applicants compared to 13% of all credit users have subprime credit.

Though, research indicates that late payments on buy now, pay later loans are frequent. Late payments may harm consumers’ credit once data regarding buy now, pay later transaction once starts getting regulated regularly. 

Things To Watch Out For

In terms of buy-now, pay-later loans, consumer advocates suggest exercising caution. These are mostly unregulated loans because the accounts are of a novel sort of nature The Consumer Financial Protection Bureau is investigating the dangers that consumers may face. Risks associated with “buy now, pay later” include the following.

  • Buy now, pay later loans do not provide the same level of protection as credit cards do, like dispute resolution or product disclosures.
  • The simplicity of usage and application could encourage more impulsive purchases or a rise in debt.
  • It may be simple to forget a due date while managing numerous buy now, pay later payments, which could result in legal action.

18% of the more than 2,000 participants in a Consumer Reports survey carried out in 2022 reported using a buy now, pay later loan. About 20% of those customers complained about issues varying from reconsidering impulse buying to challenges with returns, customer support, or grasping interest and fee rates.

Although “buy now, pay later” financing may not seem like it generates a new financial obligation, it does actually. Some people may feel the urge to use it excessively, specifically if the payments aren’t recorded to credit bureaus. You can believe that your credit score won’t have any effect on the repeated borrowing you do.

Extra Reading

Get To Know When Your Loan Gets Reported 

Depending on the service you use, loans with a buy now, pay later scheme may or may not report to the credit bureaus.

Your payments will have an impact on your credit score if you utilize a service that sends information to the credit bureaus. Your credit score will increase if you make your payments on time, while it may decrease if you make your payments late.

A newly created account can also lower your average credit age which lowers your credit score. As the account ages, your credit score may increase if you manage your other loan requirements correctly.

To ensure that the payment process gets reported appropriately, look over your credit report. offers an annual free credit report request service.

Utilize a free tool like Credit Karma or Credit Sesame to keep tabs on how the concerned authority reports your payment arrangement. You can submit a letter to the financing firm directly to dispute inaccuracies, or you can do so with credit bureaus as well.

Attention! You will be glad to know that by visiting, you can obtain one free credit report every week from Equifax, TransUnion, and Experian till December 2023.

Point-Of-Sale Instalment Loans Vs Retailer Financing

Some retailers have their buy now, pay later options in-store or on their websites. You can choose online payment plans from a few retailers with many different websites.

Applying for this third-party financing is an option you can select at the point of purchase. Point-of-sale instalment loans are the name for these payment schedules. The payment plan is divided into a set monthly payment over time which is based on the full cost of your purchase.

Available Options For Building Your Credit

Before “buy now, pay later” loans to appear on credit reports, it may take several months or more. However, you can now improve your credit while using a credit service that reports the data to credit bureaus. Available credit options are listed below.

  • Obtaining “approved user” status

It gives you access to the primary user’s credit history, which is the process of having someone add you. Authorized users can use a credit card, but they are not accountable for paying it back.

  • Credit-builder loans

With these, you must repay your loan before getting your money. If you take this course of action, be sure to verify fees, ensure that you can afford the payments, and select a company reporting all three credit bureaus.

  • Credit cards with secured Transactions

You’ll need enough cash to put down a deposit, which is normally equal to your credit limit. It’s preferable to pick a secured credit card that ranks to a standard card and reimburses your deposit after a set number of on-time payments.

  • Credit cards as an alternative

Such cards can be a means to get on the credit radar. Because they use non-traditional data in underwriting decisions, like income, employment, and banking details.

  • Retail Store cards

Some require fewer requirements than conventional credit cards and depend more on financial data from sources from outside the credit ecosystem. As interest rates are often high, ensure you can pay the full amount due.

  • Tradelines

By adding tradelines to your credit reports, Experian Boost and its rival eCredable can represent your payments every month. This is for services like utilities, streaming, cable, and cell phones as well as other expenses. However, Boost only impacts Experian credit reports, whereas eCredable only affects TransUnion reports.

Note! Paying on time is essential with any credit product. Late payments may result in penalties, increased interest rates, and harm to your credit rating.

Regardless of how it may affect your credit, it’s crucial to think about your ability to repay any additional debt. The whole cost of financing should be weighed with the cost of full payment.

The Bottom Line

Depending on the service you use, loans with a buy now, pay later option may or may not report to the credit bureaus. You should carefully study the terms and conditions to comprehend how or why the loan may impact your credit.

Your payments will have an impact on your credit score if you utilize a service that sends information to the credit bureaus.

Frequently Asked Questions

Is using the buy now, pay later option a wise decision?

Avoid using buy now, pay later if you’re struggling to pay your expenses, or accumulate emergency savings. It’s simple to splash the cash with it because of how convenient it is. If that occurs, you can be hit with expensive fines or referred to collections Both of them would lower your credit score. Moreover, plans with no interest are available.

Do companies that let customers pay later report the credit bureaus?

Buy Now, Pay Later providers will have the option to report the well-known “pay-in-four” loans starting on February 28, 2022. It is all possible due to a systematic procedure announced by Equifax at the end of 2021.

Why is pay later preferred over credit cards?

Buy now, pay later options often have no interest charges, unlike credit cards. Buy now, pay later loans do not allow customers to receive rewards in the manner of cash back, miles, or credits.

Buying now and paying later going to replace credit cards?

Buy now, pay later can help people who don’t have the credit or can substitute expensive credit cards or unsecured loans. However, it can also encourage people to overspend and suffer the consequences.