Does Using Buy Now, Pay Later Affect Your Credit Score?

Buy now, pay later (BNPL) is a type of short-term financing plan that lets you break purchases into smaller payments than you repay over time in installments. For example, Zip lets you pay in 4² biweekly installments, with just 25% of the total amount due at checkout, plus a portion of a small installment fee in your initial payment.

In many cases, BNPL services offer interest-free plans, as long as you stick to your repayment plan. Be sure to read the terms of your agreement to understand what charges or interest may apply. You can use BNPL to help pay for unexpected bills, travel, clothing, school supplies, holiday shopping, and more.

In most cases, yes. There are two types of credit checks that lenders can perform: 

• Soft credit checks, which don’t affect your credit score

• Hard credit inquiries, which typically cause your credit score to drop by roughly 5 points per inquiry. Multiple hard inquiries can compound and reduce your score. 

When you apply for a buy now, pay later plan, the provider may run a soft or hard credit check depending on their policies. So if you’re wondering, Do payment plans affect credit score ratings?, the answer is that it depends on the provider.  Zip performs a soft credit check, which won’t affect your credit score by applying.

Some – but not all BNPL providers – report account activity, like missed payments, to the major credit bureaus (Experian, Equifax, and TransUnion) . Due to variations between BNPL providers, it’s important for new applicants to read the terms and conditions of their application before signing up.

Does Zip report to credit bureaus?

Zip does not report customer payment information to credit bureaus, and uses a soft credit check when you apply. That means your credit score won’t be affected by your application, even if you’re initially denied.

If you miss a payment, make a late payment, or default on your loan, your plan’s provider may report the activity to one or more of the major credit bureaus. If your BNPL provider reports late or missed payments, this could cause your credit score to decrease, impacting your future eligibility for financial products like loans and credit cards.

You can avoid this situation and positively impact your credit score by making consistent, on-time payments. Zip keeps you on track with automatic reminders, and also allows you to change your payment due date¹ in case you need extra time.

BNPL services make shopping more convenient for buyers, offering added financial flexibility. are easy to use, simple to sign up for, and give shoppers more financial flexibility. However, they also come with some risks that shoppers should be aware of. For instance, one potential downside of BNPL services is that they can tempt customers into purchasing more than they comfortably afford, which can lead to the accumulation of debt. Additionally, it can be difficult to stay on top of multiple BNPL payments across different providers and keep track of when your next payment is due. 

Another potential drawback of BNPL is that returning items or getting refunded can be complicated. That’s why Zip makes returns as simple as possible for customers. As long as the original retailer approves the return, Zip refunds your purchase — no questions asked.

Although many BNPL plans do not report on-time, late, or missed payments to credit bureaus, they can potentially have an indirect benefit on your credit score by making it easier to pay your bills on time. Zip installment payments are automatic and you’ll also receive a reminder before a payment is due. 

You can also use BNPL to break up large purchases, like plane tickets or a new laptop, which frees up more room in your budget that you can put toward paying off debt on revolving accounts that impact your credit score. And if you choose a BNPL provider that reports to the major credit bureaus, you can establish good credit by consistently making timely payments.

BNPL providers are generally considered to be safe, legitimate financial services. However, it’s still important to do your research when choosing a provider, as some services may be more reputable than others. 

When considering BNPL options, be sure to compare what fees they charge, whether they charge interest, how many installments they allow you to make, and whether they perform a soft or hard credit check for new applicants. It’s also a good idea to check out recent customer ratings and reviews. As always, be sure that you read and understand the terms and conditions of your service agreement before signing up.

Using BNPL responsibly can help you avoid negative impacts to your credit, while giving you an added tool to help manage your finances. Please note that these are just suggestions and not a substitute for financial advice. 

• Always be sure to make payments on time and in full. 

• If you need more time to make a payment, be sure to request a new payment date at least 24 hours in advance. 

• Only apply for one BNPL loan at a time. 

• Choose a BNPL service that uses soft credit checks. 

• Set a budget to help you avoid overspending. 

• Check your credit score on a regular basis, which is free and won’t hurt your score. 

• Review your free annual credit report for errors.

BNPL services can play a role in helping you establish or improve your credit. Automatic payment options can help you avoid forgetting payment dates, which can have a negative impact on your credit score if your BNPL provider reports to the major credit bureaus. Additionally, some BNPL plans provide an interest-free option for shoppers who don’t qualify for credit cards. When used responsibly, BNPL plans can be a helpful tool for strengthening your credit over time.