Does Afterpay affect credit score?


Afterpay can be a useful way to buy now pay later when your finances are strained. It can improve your financial situation in the short term and won’t hurt you if you make a late payment or miss payments entirely. 

So, does Afterpay affect credit score? We’ll answer below!

Let’s get to the following commonly asked questions:

  • What is Afterpay?
  • How can Afterpay affect your credit score?
  • Does Afterpay do a credit check?
  • Does Afterpay report to credit bureaus?
  • Pros and Cons of Using Afterpay
  • How to Use Afterpay Responsibly

What is Afterpay?

Afterpay is a buy now pay later (BPNL) platform based in Australia with an Australian Credit Licence (ACL). As a consumer, you can choose to split your purchases from online or in-store shops into multiple payments over a set period of time. Or, you can choose to pay the full balance later by logging into your Afterpay account. 

Similarly to credit card companies, Afterpay is a credit provider. It does not charge traditional interest on purchases, and the company won’t conduct credit checks to see whether you can open an account. They won’t consider your repayment history and credit score or review your previous credit reports. 

As Australia's cost of living rises, BNPL providers are more popular than ever. But will using Afterpay affect your credit score?

How can Afterpay affect your credit score?

The good news is that late and missed Afterpay payments won’t directly impact your credit score. However, it’s still a good idea to make payments on time. By keeping your credit utilisation ratio low, you can actually improve your credit score with Afterpay. 

Let’s take a closer look at how Afterpay indirectly affects your credit score: 

Credit utilisation 

Like all credit providers, the amount you spend on Afterpay will contribute to your credit utilisation ratio. If you have a high spending rate compared to your borrowing power, this will have a negative effect on your credit history and credit file. 

Credit mix

Taking out multiple credit products like credit cards, investment property loans, and Afterpay credit will positively impact your credit mix, contributing to your scoring. 

Does Afterpay do a credit check?

Afterpay does not legally need to perform credit enquiries on all new customers. Typically, lenders will perform a soft credit check on customers, which doesn’t affect your credit score in any way. 

Note: Though you don’t need to check whether you’re eligible for Afterpay, you should always check your credit score anyway. If you have a below-average score, you might want to reconsider using a financial product like Afterpay. It could put you into worse financial hardship in the long term. 

Does Afterpay report to credit bureaus?

Afterpay does not have any contact with credit report bureaus or reporting bodies. So, even if you have late payment fees, it won’t affect your personal finances in any way. However, just like any personal loan, you should avoid making late loan repayments. The late fee may harm your spending power over time. 

Pros and cons of using Afterpay

Afterpay sounds too good to be true, right? Despite not affecting your credit, there are some risks you should be aware of. Let’s examine the pros and cons of opening your first Afterpay account. 

The ability to make purchases without interest

We’ve already established that Afterpay and your credit don’t mix. But what are the other benefits? Afterpay allows you to split your purchases interest-free, meaning you can pay for products over time without incurring additional fees. This can empower you to make larger purchases without feeling the strain on your finances. 

The potential to overspend

With the power to pay in interest-free instalments comes responsibility. Because Afterpay gives instant loan approval, some get carried away and make purchases that go above what they can afford. When it’s time to make repayments, it can shock the system. 

Important: Like any financial product, it’s essential to exercise caution and use a loan repayment calculator to work out what you’ll be expected to pay back every month. 

The risk of late fees

While Afterpay won’t contact reporting bureaus when you make late payments, you’ll be subjected to fees and charges. It’s important to assess the affordability of the repayment plan and whether you’re able to take out monthly repayments. Late fees could force you to fall behind on other payments, leading to a bad credit score. 

How to use Afterpay responsibly

Like any line of credit, you need to practice responsibility. While using this BNPL platform won’t affect your score, Afterpay affects your monthly repayments, making it more difficult to pay for other credit products like credit cards or business loans. 

Budget and plan for payments

  • Before using Afterpay, create a budget that includes all your monthly expenses, including the Afterpay payments you'll need to make.
  • Plan your purchases carefully and consider whether you can afford the items you're buying without stretching your budget.

Understand the Terms and Fees

  • Read and fully understand Afterpay's terms and conditions, including the repayment schedule, fees, and late payment charges.

Avoid Overspending

  • Don't use Afterpay to buy items you don't need or can't afford. It's easy to accumulate debt if you're not careful.
  • Stick to your budget and resist the temptation to make impulse purchases.

Summing up

Despite not affecting your credit score, creating an Afterpay account doesn’t come without risks. You need to make healthy financial decisions and avoid the temptations of large purchases you can’t afford. By sticking to a responsibility plan, you’ll have all the tools to benefit from Afterpay’s interest-free instalment plan. 

If you liked this article, check out the WeMoney blog, where we regularly post financial advice. Alternatively, read our latest article, “What are payday loans?

Wait! We’d love to hear your thoughts

If you enjoy using our app, please take a moment to rate it in the App Store. Your feedback in the past has tremendously helped us at WeMoney to improve the app to help it be the best that it can be. A massive thanks to each one of you for making that happen!

Disclaimer: The author is not a financial advisor, and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.

Turn your learnings into practice
Try WeMoney today.