If you’re on a tight budget, you might consider going with buy-now-pay-later services, as you can space your payments out over a certain period of time to make them more manageable.
Of course, before solidifying this type of service for yourself, you should consider what kind of impact this service will have on your credit score.
One of the ways that a buy-now-pay-later service could have an impact on your credit score is through the hard inquiry process. Hard inquiries can negatively impact your credit score. The more hard inquiries you have on your credit score, the worse it can be.
More often than not, you won’t see any greater than five-point drops per hard inquiry, though these can have a significant impact when added up.
To work regularly with a buy-now-pay-later service, you will have to get a hard inquiry on your credit report. Luckily, many BNPL providers don’t require credit checks.
Here’s a quick overview of some of the most popular BNPL services that require credit checks.
BNPL Services That Require Credit Checks
- Affirm: Affirm requires soft credit checks to grant approval to its customers. Their services break down payments into quarters. However, you can space your payments out even further with BNPL, though, in that case, they may end up running a hard credit check.
- Klarna: Klarna performs a soft credit check just like Affirm if you decide to pay in four payments or within a 30-day period. However, Klarna will institute a hard credit inquiry if you opt for their monthly financing plan.
- PayPal: PayPal is another service that offers a ‘Pay In 4’ option, breaking up your payment into four equal payments. As with the other two options, the ‘Pay In 4’ method will require a soft credit inquiry, which won’t have an impact on your credit score.
BNPL Services That Don’t Require Credit Checks
- Afterpay: You don’t have to get a credit check when using BNPL services from Afterpay.
- Zip: Zip does not require a hard credit check, though they might end up using information related to your credit when choosing whether or not to approve your account.
- Sezzle: Sezzle is another BNPL company that does not require a credit check for its services.
Note that while some of these companies do not make credit checks that can impact your credit score, the fact that they report to credit bureaus can certainly impact your credit, as it could reduce the average age of your accounts.
Final Thoughts
As you can see, BNPL methods have their pros and cons. Of course, if you’re looking to make payments while boosting your credit score, there are other options.
You can also purchase authorized user tradelines to potentially boost your score.
Here at Boost Credit 101, we specialize in helping people like you raise their credit scores with high-quality tradelines. Make sure to reach out to us with any further questions regarding building credit with authorized user tradelines.
