As financial pressure mounts and expenses rise, families often turn to alternative ways of accessing credit. Buy Now, Pay Later (BNPL) services have grown in popularity, offering a quick solution to purchasing goods without paying upfront.
But can using BNPL improve your credit score, or will it hurt your financial future? While it’s easy to get drawn into the convenience of spreading payments over time, understanding the impact BNPL has on your financial health can make all the difference.
Understand BNPL and its role in credit
BNPL allows you to buy items now and pay for them in instalments, often without interest if paid within a specific time frame.
Most providers, like Klarna or Clearpay, don’t perform hard credit checks, meaning they won’t assess your credit score before granting you credit.
While you might not face the immediate consequences of a hard inquiry, BNPL services often don’t report to credit agencies. This means timely payments won’t directly boost your score, but missed payments can hurt it significantly.
Pairing BNPL with a credit building card
If you’re looking to improve your credit score while using BNPL, pairing it with a credit-building card could be a good strategy.
Some credit cards are specifically designed to help individuals establish or rebuild their credit. Just ensure you’re able to manage the repayments and keep your utilisation low.
This strategy works because credit card providers report your payments to credit bureaus, unlike most BNPL services. Over time, your responsible use of both types of credit will build a more robust profile.
Practical steps to boost your score
Using BNPL effectively to improve your credit score requires consistency. Start by making all payments on time, as missing even one could damage your score.
Try to limit your purchases and manage smaller instalments that are easier to keep track of. Pay your bills in full rather than just the minimum amount.
You’ll also want to monitor your report regularly. Some providers will allow you to adjust payments if necessary, so take advantage of this flexibility to avoid late fees and penalties that could harm your credit.
Realistic benefits and limitations
If you’re diligent about payments, BNPL can provide short-term financial relief, and in some cases, help build a solid credit history. However, if you’re not careful, it’s easy to accumulate debt quickly.
Additionally, not all services report to credit agencies, so any responsible behaviour you show might not be reflected in your score. BNPL is a tool, so using it irresponsibly could have long-lasting negative effects.
When done thoughtfully, though, it can help you lay a foundation for better credit, but only if you manage it alongside other credit-building strategies.