Does overdue Afterpay affect credit score?

Does Afterpay Affect Your Credit Score? The Indirect Impact of Buy Now, Pay Later

Buy Now, Pay Later (BNPL) services like Afterpay have revolutionized the way many people shop, offering a convenient way to spread payments over time. However, a common question lingers: does using Afterpay, or similar services, affect your credit score? The short answer is no, not directly. Afterpay, and most other BNPL providers, do not report your payment history to the major credit bureaus (like Equifax, Experian, and TransUnion). This means your on-time or late Afterpay payments won’t appear on your credit report.

But the story doesn’t end there. While Afterpay itself won’t ding your credit score, your payment behavior can still have significant indirect consequences. Consistent late payments with Afterpay can create a ripple effect that impacts your creditworthiness in other ways:

1. Negative Reflection on Financial Responsibility: Lenders, particularly those considering applications for loans, credit cards, or mortgages, often review your bank statements as part of their assessment. A history of late Afterpay payments, coupled with associated fees, paints a picture of inconsistent financial management. Even though it’s not on your credit report, this pattern of missed payments can raise red flags and reduce your chances of approval.

2. Debt Accumulation and Increased Financial Strain: Repeated late payments with Afterpay lead to accumulating fees and interest charges. This can quickly spiral into a significant debt burden, impacting your overall financial health. High levels of debt, regardless of the source, are a major factor considered by lenders when assessing creditworthiness. Even if you’re managing your other debts responsibly, a large outstanding Afterpay balance can overshadow this positive aspect.

3. Potential for Collection Agencies: If your Afterpay debt remains unpaid for an extended period, Afterpay may eventually refer your account to a collections agency. This is a serious matter, as collection agency activity does appear on your credit report, significantly damaging your credit score and making it harder to secure future credit.

The Takeaway: While Afterpay doesn’t directly report to credit bureaus, irresponsible use can indirectly affect your ability to obtain credit in the future. Maintaining a consistent record of on-time payments is crucial, not just for avoiding fees and late payment penalties with Afterpay, but also for maintaining a positive financial image that will benefit you in the long run. Responsible BNPL usage involves careful budgeting and ensuring you can comfortably afford the scheduled payments. If you struggle to manage your payments, consider exploring alternative payment options to avoid potential negative consequences.