Online shopper using buy now, pay later financing on mobile device
03 Aug 2023

How Buy Now, Pay Later Financing Affects Your Credit Score

Buying something now and paying for it later can be tempting and convenient, especially for large purchases. However, have you ever wondered if using “buy now, pay later” financing options from individual retailers can impact your credit score? It is a question that many consumers may have and is worth exploring.

While it is true that these types of financing options are usually available without a credit check, it does not necessarily mean that they will not have implications on your credit score. In this article, we will dive into the details of “buy now, pay later” financing, how it works, and how it could affect your credit score.

What is “Buy Now, Pay Later” Financing?

In the modern world of online shopping, consumers can choose from many different payment options, including “buy now, pay later” financing. This type of financing, offered by individual retailers, allows customers to make a purchase and pay it off in installments over a period of time.

For those who want to take advantage of a sale or buy a high-priced item, this option can be a convenient purchase method without straining their budget. However, consumers need to understand the terms and conditions of these financing options to avoid penalty fees.

Does “Buy Now, Pay Later” Financing Affect Your Credit Score?

The financing option of “buy now, pay later” is similar to using a credit card, but it does not impact your credit score in the same way. Some newer “buy now, pay later” systems do not require a loan application, so a credit agency makes no credit inquiry. When you provide your Social Security number (full or last four digits) while applying for a loan or new credit line, it generally means that your credit score and history will be checked to approve your application.

If you use buy now, pay later services, your credit score will not be affected because there will not be a hard check on your credit history. Most buy now, pay later companies do not review your credit report or history, resulting in no impact.

Buy now, pay later companies do check if you are eligible for their services. To avoid being blocked from using their services in the future, you must ensure that you have enough funds to cover each installment of your monthly payment plan. Being habitually late on payments or failing to cover the installments may cause you to be banned from using their services again.

To ensure the safety of your finances, always carefully read the terms and conditions before agreeing to any payment plan and ask whether a hard credit check will be conducted.

How to Tell If Your Loan Reports to Your Credit

Before borrowing money, it is crucial to ensure that the loan will be reported to a credit bureau. Although a credit check will most likely be conducted, it is necessary to thoroughly examine the details to confirm whether the loan will be reflected on your credit report.

If you decide to use a buy now, pay later service that reports to a credit bureau, remember to practice smart borrowing. Remember that opening a new line of credit, including loans, can lead to a lower credit score because it reduces your credit age. If your score drops after financing through a buy now, pay later program, it is likely that the service reports to credit agencies. Additionally, paying on time (or even early) is crucial if your loan is reported to credit bureaus.

After finishing the installment plan, verify that it appears accurately on your credit report. Remember to visit to obtain a complimentary report from any of the three major credit bureaus, or use a credit monitoring service, like Fund&Grow Credit Services, to review your credit more regularly. Check if your loan is marked as fully repaid; if not, you must submit a dispute to the credit bureau.

If your buy now, pay later loan is not reported to a credit bureau, your credit report will not be affected by your good or bad payments. Regardless, making payments on schedule and paying off your loan completely is crucial. Defaulting on the loan can result in the lender sending your debt to a collection agency to ensure you repay it.

Pros and Cons of Buy Now, Pay Later Financing

While there are some advantages to using “buy now, pay later” financing options, it is essential to be aware of the potential drawbacks.


• Can help you buy something more expensive than you could not usually afford at once.

• Gives you time to budget for payments rather than immediately having a lump sum due.

• Allows you to get the item you need immediately, rather than waiting until you have saved enough money.

• No hard credit check is conducted when applying for some of these services.


• Late payments can result in penalties and interest charges.

• Can lead to impulse purchasing if not appropriately managed.

• Not all retailers offer this type of financing, so you may be unable to use it for all the items you need.

• You may need to provide your Social Security number or other personal information to apply for these services, which could put your identity at risk if the company is not secure.

How to Apply for Buy Now, Pay Later Financing

Applying for “buy now, pay later” financing is straightforward. However, the specific requirements may vary from one retailer to another. Generally speaking, you must provide your basic contact information, such as name, address, and email address. You will also need to enter your Social Security number or the last four digits of it.

Once you have completed the application process, you will be presented with a payment plan. Make sure to read through it carefully before accepting. Once accepted, you will receive confirmation of your application and can begin using the financing option immediately.

Is Buy Now, Pay Later Financing Right for You?

Opting for buy now, pay later loans from individual retailers can positively and negatively impact your credit score if they report to your credit. On the one hand, timely payments can boost your score, while missed payments can result in a decline.

However, if you carefully consider the loan terms and ensure it fits within your budget, these loan options can be a helpful way to purchase what you need without having to pay upfront.

To ensure you make the right decision, carefully read the fine print and repayment terms, and only take out what you can afford to pay back on time. Ultimately, the choice is yours, and by being informed and diligent, you can use buy now, pay later loans responsibly and to your advantage.