How do BNPL schemes impact your credit score?

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By Sarah Watts
Updated on Thursday 17 August 2023

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Buy Now Pay Later (BNPL) arrangements are increasingly popular, enabling many consumers to buy something before they can afford to pay for it and make more expensive purchases by spreading the cost.

Last Christmas, UK consumers racked up a staggering £2.3 billion of BNPL debt. However, 2 million Brits have said they were unaware that using BNPL schemes had an impact on their credit score.

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How buy now pay later works

If you enter into a BNPL arrangement with a retailer, it means you commit to buying something on finance (which is a form of borrowing) straight away, but you pay for it at a later date or spread out over a few months, for example.

BNPL is a type of interest-free credit, but if you do not pay the debt in full and in time before the agreed interest-free period expires (the ‘pay later’ deadline), then:

  • You could have to pay a late payment and/or settlement fee
  • Hefty interest can be added to your debt in a lump sum
  • Missed payments can be reported to credit reference agencies and shown on your credit file

Do you need a good credit score for BNPL schemes?

Yes, most BNPL providers will check your credit score and conduct a ‘soft search’ when you apply on smaller purchasers, but for larger, more expensive purchases, they will usually conduct a ‘hard search’ of your credit file(s).

If you have a low credit score and/or a chequered credit history, this indicates you are not a reliable borrower and it’s highly likely your application for BNPL will be declined.

However, it is not just your credit score that affects your eligibility for BNPL schemes. You can have an excellent credit score but still have a BPNL application declined, especially for more costly buys.

To find out more about credit checks or soft and hard searches, check out our guide: Credit checks explained and learn what a good credit score is.

Check your score with Checkmyfile - Sign up now for a 30-day free trial and cancel anytime (there is a £14.99 monthly fee after the trial):

The pros and cons of buy now pay later

Just like any other form of borrowing, BNPL has advantages and disadvantages - here’s a brief summary of what you should consider before entering into a scheme:



Don’t miss out on purchases

Can affect your credit score

Makes expensive items more affordable

Can cause debt problems

Great alternative to a credit card

0% interest deals not FCA regulated

Easy and convenient

High interest if don’t settle in full, on time

Learn more: What affects your credit score?

How can BNPL affect your credit score?

There are three different ways in which BNPL can affect your credit score:

  • Rejected application - if you apply for a BNPL deal for more expensive items, very often a hard check will be made of your credit file. If your application is declined, this will be visible to other potential lenders on your credit report making them question your creditworthiness.
  • Multiple BNPL applications - if, after being rejected, you continue to reapply for BNPL deals, doing so will further negatively impact your credit rating and multiple applications will be a ‘red flag’ to other lenders.
  • Missing payments - if you miss payments, these will be recorded on your credit file and if you miss several, you can end up having a default recorded on your credit file for 6-7 years. This will cause difficulties when you try to obtain credit in the future.

Does klarna improve your credit score?

Klarna can improve your credit score but only if you handle your debt responsibly and ensure you pay the full balance on time and never miss a payment.

As reported by BBC Business, one student who used Klarna missed payments and had no idea this would affect her credit score and reduce it by almost half!

It’s not only missed payments with Klarna that can harm your credit score… If you apply for one of Klarna’s 18.9 percent finance options, they conduct a hard check of your credit file that is visible to other lenders. So if your application is denied, this will look bad to other lenders and can impact your credit score.

Read more: Does Klarna impact your credit score?

Does every BNPL lender carry out a credit check?

Most BNPL lenders carry out a soft credit check for small purchases and most lenders carry out hard credit checks for larger purchases.

Because many consumers are racking up huge sums of debt, This is Money has reported that new FCA regulations are proposed that could require BNPL lenders to carry out hard credit checks for all BNPL schemes.

How long do missed payments stay on your credit report?

Missed payments will stay on your credit report for at least six years and sometimes up to seven years, regardless of whether or not you have since settled the outstanding payment.

Not sure what your credit score currently is? Check it now with Checkmyfile's 30-day free trial to get an idea of your borrowing eligibility (£14.99 after free trial - cancel anytime):

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