We are witnessing the proliferation of innovative ‘buy-now-pay-later (BNPL)’ platforms within Australia and globally. Consumers are compelled by flexible, interest-free payment options, allowing them to spread the budget hit of purchases over time. Boasting over 16 million customers worldwide, Afterpay is leading the charge of this disruptive new payment method. However, consumers are entitled to know: does Afterpay affect your credit rating?

Does Afterpay affect your credit score?

You may be wondering, is Afterpay bad for your credit rating? In a word, no, Afterpay should not affect your credit score. Afterpay claims to neither credit check their BNPL customers nor report late payments to the credit reporting bureaus. Keep in mind that not all BNPL providers have provided the same assurances. It is also unclear as to whether Afterpay will eventually report instances of non-payment, which could negatively affect your credit rating.

What is Afterpay?

Key disruptors of the way consumers pay for goods, Afterpay took the concept of lay-by payment and transformed it for the modern age. Approved customers can make repayments over time for purchases from select participating stores without the accompanying burden of interest and hidden fees. App-centric and intuitive, they loosened the market grip of credit card providers – famous for high interest and inflexible terms.

In contrast to most credit cards, there are no associated account fees, no interest rates charged on purchases, no hard credit check reported, and fewer personal details required to apply. This has endeared Afterpay as an alternative to the younger generations of consumers, encouraged by the more forward-thinking approach that recognises their needs.

Similar to a credit card, you may see an increase to your afterpay limit over time, as the longer you use your account – and make timely payments – the higher your spending limit. Good payment behaviour and loyalty to Afterpay could earn you the maximum Afterpay limit of $3,000.

In Australia, Afterpay offers registered BNLP account holders over 18 this payment service, though it may only be used at participating outlets. Typically 25 per cent of the purchase will be paid upfront, unless using their loyalty program, Pulse. Customers can pay for items using Afterpay online, or in-store through a ‘digital card’ in their phone wallet.

Retailers that have signed up to Afterpay include:

• Jetstar
• Catch
• The Iconic
• K-Mart
• Mimco
• Witchery
• Target
• David Jones
• Country Road
• See the full list here

Does Afterpay do credit checks?

It depends on what sort of credit check you’re referring to. The Help Centre information indicates that Afterpay may sometimes conduct a ‘soft credit check’ on customers when they first sign up. Does Afterpay affect your credit score as a result of this? Thankfully: no, a soft credit check, while detailing some information about your creditworthiness, does not impact your credit score or rating.

Afterpay does, in fact, reserve the right legally to conduct a ‘hard check’ of your credit file. Were this to happen, it could detrimentally affect your credit rating. However, Afterpay has expressed that they do not intend to do so:

“At Afterpay, we never do [hard] credit checks or report late payments. We don’t believe in preventing people from accessing Afterpay because they may have had an old debt from a long time ago.”

Even other BNPL providers may be more rigorous in their credit checking of customers, with competitor ZipPay known to be more thorough in their creditor due diligence before approval. It is important to ensure that you understand the terms and conditions of the business you’re dealing with prior to signing up.

Does missing a payment affect my credit score?

As outlined above, Afterpay has expressed that they never report late payments to credit reporting bureaus. This is distinct from a significant number of their direct competitors, such as credit card providers, who are historically more inclined to report such events. If this is the case, then your credit score (the number from a credit reporting body detailing your creditworthiness) may be unaffected. 

Equally, any use of Afterpay will not have a positive effect on the credit score of a business or individual either. It may neither help nor hinder, because there is generally no interaction with any credit rating agencies or bureaus, and your credit file remains separate.

The only exception may be repeat instances of non-payment – particularly if they represent a trend for that customer. These may indeed be reported to credit reporting bodies, negatively affecting your credit score and hampering your ability to secure credit in the future. So, while some leniency is provided, it is not to be taken advantage of.

Put simply, if you’re asking yourself does Afterpay affect my credit score in Australia, then the answer is no. Not unless you are seriously neglectful in your payment behaviour.

Are there any other comparable BNPL providers?

• ZipPay – conduct a credit check, and charge a monthly $7.95 fee. However, this fee is waived if the customer pays their closing balance in full.
• Humm – conduct a credit check when you apply for purchases over $2000. Charge an $8 fee for all ‘big’ purchases, also applying to smaller purchases with a repayment term of longer than ten (10) weeks.
• LatitudePay – similar to Afterpay, they conduct a ‘soft’ credit check and charge no monthly account fees. There is a fee of $10 for late purchases.
• Affirm – more of a loan style of arrangement. They also conduct a ‘soft’ check of your credit file. In contrast to other BNPL providers, you will be expected to pay interest on the money loaned, though there are no monthly fees.
• StepPay – An example of a bank exploring the BNPL space – offered by CommBank. Standard credit checks will apply, and there are no monthly fees or interest.

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