Buy now pay later affect on Credit Score?

BlueEngineer

Hello,

I was told recently that someone put a new fridge on a 0% buy now pay later payment. This negatively affected their credit score as it was classed as an 'emergency loan'. I think it makes sense to do the buy now pay later rather than paying all in one go, since the final payment will be the same and I get to keep cash around for emergencies, so I will consider doing this in the future when buying items for my house, but I don't want it to affect my score. Is it common for these loans to affect your score in this way?

20aday

Hello,

First and foremost welcome to MSE. Secondly you don't have a 'credit score' but you do have a credit history. So please, please ignore it. It's pretty much "meaningless".

I've got an Argos Store Card and have had two "Buy Now, Pay Later" plans running this year. There's definitely no negative effects as they've increased my limit with them in both January and of August.

I've also had BNPL in the past with the likes of Very and again, no negative effect(s). Hope that helps.

Kokulan

I have done couple of BNPL before to buy Gaming PC and other stuff. While I was on it, my Clear Score credit history showed BPNL amount under long term dept while the Credit Card dept were shown as short term depts. After i paid off the BNPL amount, my score definitely went up at least by 15 in clear score scale. I am now thinking of buying house in about an year but I am not sure if doing more BNPL will improve or reduce the chances of mortgate approvals. Could anyone with knowledge or experience in this area help me to understand this?

Thanks

[Deleted User]

Ignore your score and don't take out loans you don't need.

sourcrates

Lets get one thing straight here, as a lot of people are under the assumption that your "credit score" is important as to weather you gain credit, or not.

(1) Credit scores are numbers generated by the credit reference agencies, and are made up of various meaningless analytical statistics, imputed to a computer, which then spits out a number, based on how the CRA`s view how you use credit.

(2)This is NOT how a potential lender would view you, they never see this number, only you can see it.

(3) Lenders look at your credit history using there own credit scoring techniques, which may, or may not, be different from the system used by the CRA`s.

(4) Where do you hear about your credit score most, other than on these forums ?, thats right, on the telly, during an advert, that should tell you all you need to know about credit scores.

SnowTiger

BlueEngineer wrote: »

I was told recently that someone put a new fridge on a 0% buy now pay later payment. This negatively affected their credit score as it was classed as an 'emergency loan'. I think it makes sense to do the buy now pay later rather than paying all in one go, since the final payment will be the same and I get to keep cash around for emergencies, so I will consider doing this in the future when buying items for my house, but I don't want it to affect my score. Is it common for these loans to affect your score in this way?

Short term (payday) loans are highlighted on credit reports. I don't think there's an 'emergency loan' classification.

ShivasPlace

BlueEngineer wrote: »

Hello,

I was told recently that someone put a new fridge on a 0% buy now pay later payment. This negatively affected their credit score as it was classed as an 'emergency loan'. I think it makes sense to do the buy now pay later rather than paying all in one go, since the final payment will be the same and I get to keep cash around for emergencies, so I will consider doing this in the future when buying items for my house, but I don't want it to affect my score. Is it common for these loans to affect your score in this way?

My wife bought both a sofa and nursery furniture on 0% interest, 12 month buy-now-pay-later offers.

Once they were both settled, both credit services regularly sent her 'invites' to take out loans and credit cards with them - so, as 20aday suggests, they probably improve your credit worthiness.

sourcrates

BlueEngineer wrote: »

Hello,

I was told recently that someone put a new fridge on a 0% buy now pay later payment. This negatively affected their credit score as it was classed as an 'emergency loan'. I think it makes sense to do the buy now pay later rather than paying all in one go, since the final payment will be the same and I get to keep cash around for emergencies, so I will consider doing this in the future when buying items for my house, but I don't want it to affect my score. Is it common for these loans to affect your score in this way?

If this is within an existing credit account, such as a catalogue account for example, then there is no separate section for it, and it will be recorded as per how you run your account.

If its a one off purchase, say from curries, it will be recorded as any other credit purchase would be recorded.

High interest, short term loans, such as payday loans, are frowned upon by main stream lenders, however, just because they are recorded in a separate section, they in them selves do not impact on your credit file, but any lender seeing a pattern of payday loan borrowing, would probebley not lend to you, if they were, say within the last six months of your application.

There are lots of myths about credit scores, credit file reporting, look at your own file, basically, what you see, is what lenders see, except the score of course.