Buy now, pay later platforms could soon affect your credit, experts say

ByHeather Grubola and Nydia Han WPVI logo
Wednesday, May 15, 2024
How changes to ‘Buy Now, Pay Later’ service could affect your credit
More and more consumers are using ‘Buy now, Pay later’ services to make purchases. But before you tap, you need to be aware of how that could affect your credit.

More and more consumers are using buy now, pay later platforms to make purchases, but before you tap, you need to be aware of how that could affect your credit.

Payment history from your credit cards, loans, and many other types of bills ends up on your credit report.

Now, your Apple Pay Later history shows up too, and experts said Apple is just the first company to submit information to a credit bureau.

They expect others will soon follow.

"At NerdWallet, we found that 25% of Americans have used a buy now, pay later service in the past year," said Sara Rathner of NerdWallet.

Their popularity is skyrocketing. In March, Apple became the first major provider of buy now, pay later loans to fully report its four-installment loan information and account histories to a credit bureau.

"It will likely break the seal and cause a lot of these other buy now, pay later providers to start providing that information," said Nick Wolny of CNET.

Apple's Pay Later loans and payment history will be reported to Experian.

"FICO, which is a widely used credit scoring model for loan decisions doesn't include buy now pay later information at present," said Rathner.

So your credit score won't be immediately affected. But be aware that anyone examining your credit history will see that you're taking out loans to make purchases.

"When you choose the buy now, pay-later option, a soft credit poll occurs. And so while it may not count as a hard inquiry and may not negatively affect your credit score at the moment, if you are going to apply for something like a car loan or a mortgage and someone looks at your credit report, they're going to see that buy now, pay later data on that credit report," said Wolny.

So if a mortgage loan servicer is looking at your credit history and sees that you're asking for a big loan but splitting up your weekly grocery bill into four payments, it might cause the services to pause.

"You know, there's kind of a concern here. And so it's just good for consumers to know that buy now, pay later usage, it is a loan at the moment, and it will appear in your credit history," said Wolny.

So while buy now, pay later is convenient and tempting to use, do think about how it could impact your overall credit picture.