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BNPL might not be credit, but it can still affect your credit score
Even those opting for alternatives to a traditional credit card should keep their credit score in mind when it comes to keeping on top of repayments.
BNPL might not be credit, but it can still affect your credit score
Even those opting for alternatives to a traditional credit card should keep their credit score in mind when it comes to keeping on top of repayments.
While buy now, pay later apps like Afterpay are not considered credit cards under Australia’s existing regulatory framework, the notion that they can’t affect your credit score is losing credibility.
Speaking to nestegg, Experian ANZ general manager of credit services Tristan Taylor said that some BNPL providers are beginning to supply data to credit bureaus. However, he’s quick to add that this might not necessarily be a bad thing.
“The more information that can be drawn on to create an accurate picture of a consumer’s financial position, the better,” he explained.
For those with “thin” credit files in particular, a pattern of responsible behaviour when it comes to BNPL apps could be enough to satisfy the expectations of those assessing future credit applications.
While it’s not something that many Australians often all that much pay attention towards, Mr Taylor emphasised the importance of knowing your credit score. When it comes to major purchases like your first home or a car, it’s a number that can hold a lot of weight.
For the unfamiliar, a credit score is a number that Mr Taylor said reflects the “relative level of risk” when it comes to lending you money via a credit card or mortgage.
The higher the credit score, the lower the perceived risk.
As a rule, credit suppliers are usually more willing to let those with lower risk borrow from them. However, no credit score is set in stone.
Instead, your number is constantly changing based on a number of factors relating to your individual financial behaviour.
As a result of this dynamism, Mr Taylor recommended regularly checking in order to stay on top of your financial health.
“Knowing your credit score, and how your financial behaviours impact it, is important if you’re looking to apply for, or maintain, successful credit opportunities,” he explained.
On the other hand, Mr Taylor warned that a poor score could hinder your chances of accessing credit needed to achieve your financial goals.
“A poor or below-average credit score indicates that you have some work to do in improving the management of your existing credit,” he said.
Mr Taylor said that while improving your credit score takes time and careful management, it can be done.
And although bad behaviour when it comes to BNPL might obstruct your ability to improve your credit score, the opposite is also true.
“Even if you are just starting out, using your BNPL account in the right way can help you build up a good credit history and credit score,” he said.
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