Could a Buy Now Pay Later Impact my Credit Score?
Buy now, pay later apps (BNPL) has evolved into an emerging online payment method for over 2-3 years. While these technologies offer instant credit, free of cost financing, it’s essential to comprehend how a buy now pay later affects your credit score.
As a person’s loan credibility depends on their credit score, it is obvious to be concerned about your CIBIL score before using any credit instrument. A credit score indicates an individual’s creditworthiness or capacity to repay borrowed funds. This score is expressed as a digit based on the individual’s repayment record and credit files across different loan kinds and credit organizations. The CIBIL score ranges from 300 to 900, which is calculated by the credit information bureaus in India.
Key queries to figure out before you opt for a BNPL include:
- How can Buy Now Pay Later impact your credit score?
- Do BNPL services convey payment activity?
- Does BNPL Need a Credit Check?
How can Buy Now Pay Later impact your credit score?
Before using Buy now pay later, India, the user agrees to repay the used credit limit timely as decided. Skipping a payment can initiate late expenses, and missing numerous bills could send your account to a collection agency. When an account is sent to a collection agency, any adverse history associated with the person’s credit report, including late or missed repayments, can be conveyed to the credit bureaus. Late payment of the used amount on your CIBIL report can pull down your score. If the compensation is not made for long, it can damage your score more. Any negative detail in your report can stay up for seven years.
Do Buy Now Pay Later services to convey payment activity?
If a user makes timely repayment, a BNPL lender will report your account movement to the credit bureaus positively. On-time payment will help you build a good credit record and a sound credit score.
Does BNPL Need a Credit Check?
Ordinarily, customers who apply for loans or other types of credit go through a hard credit inquiry. However, some BNPL providers don’t require a hard credit check to qualify for them, so applying won’t hurt your credit score.
BNPL offers could be helpful tools, specifically for users who don’t have a key to other types of credit. When utilized carefully, mainly if there’s no hard inquiry or reporting, they can be extremely helpful.