In recent years, the use of Afterpay has become increasingly popular among Australian shoppers, allowing them to buy goods and services now and pay for them later in four equal installments. While this payment solution is incredibly convenient, many are wondering how it affects their credit score.
In short, Afterpay does not directly affect your credit score. Since Afterpay is a buy-now-pay-later option and not a loan, none of your Afterpay activity is reported to credit reporting bureaus like Equifax, Experian or Illion.
However, using Afterpay can have an indirect effect on your credit score. For example, if you have multiple Afterpay accounts, this could indicate to lenders that you’re relying too heavily on debt and could be a red flag. Similarly, if you’re consistently late with payments or fail to make payments for your Afterpay purchases, this could also negatively affect your credit score.
It’s also important to note the difference between Afterpay late fees and credit card interest. If you’re late with an Afterpay payment, you’ll be charged a late fee, which is typically around $10. However, if you’re late with a credit card payment, you’ll not only be charged a late fee but you’ll also be charged interest on the remaining balance. This interest can quickly add up, making credit card debt much more expensive than Afterpay debt and negatively affect your credit score.
That being said, using Afterpay responsibly can be beneficial to you. If you’re able to make all your payments on time and pay off your purchases in full, this can show lenders that you’re responsible with your money.
Overall, Afterpay is a convenient and safe way to buy goods and services now and pay for them later, but it’s important to be aware of how your Afterpay activity could affect your credit score. Be sure to always make your payments on time and pay off your purchases in full, and you should be able to enjoy the convenience of Afterpay without any negative impact on your credit score.
We Fix Credit recommend that if you use a buy now, pay later product this would be the one you chose as there are no interest repayments required and no credit check enquiries performed unlike others such as ZIP Pay and PayPal and Latitude BNPL products. The negative impact to your credit score by a simple application for these other platforms will significantly decrease your score, particularly if there is frequent applications made over a short period of time.
If you already have applied for one of the abovementioned facilities, another important thing to be aware of is when you increase your credit limit this will activate an automatic further credit enquiry, thus lowering your credit score again.
If you have too many of these enquiries there are some credit repair options available to you, feel free to contact We Fix Credit to discuss your options.
