Using Buy Now Pay Later with a bad credit score
Buy Now Pay Later allows you to make a purchase but pay for it at a later date. But can you use a payment plan like this if you’ve got a poor credit rating? We take a look...
Key takeaways
Even if you have a low credit score due to past debt problems, you may still be accepted for Buy Now Pay Later (BNPL)
Buy Now Pay Later providers often perform a ‘soft search’ on your credit history instead of a full credit check
Buy Now Pay Later can potentially improve your credit score if repayments are made on time
Be wary that you don’t slip further into debt by using Buy Now Pay Later
Shopped online recently? You may have spotted the option to pay in instalments at the checkout – known as Buy Now Pay Later (BNPL).
This payment method is a way to buy items on credit and pay for them further down the line. BNPL has surged in popularity and is available for both online and in-store purchases, offering a flexible alternative to traditional ways of accessing credit.
Will I be credit checked for Buy Now Pay Later?
BNPL providers don’t always check your credit history and rating in full. Instead, they usually perform a ‘soft search’, rather than looking in more depth at your credit history, with a comprehensive credit check.
This means that even if you've had debt problems in the past and have a low credit score, you may still be accepted for BNPL at the checkout.
While this may sound appealing, it's crucial to be aware of the potential risks, such as the temptation to overspend or the consequences of missed payments.
Will I be accepted for Buy Now Pay Later with bad credit?
Getting accepted for Buy Now Pay Later might be challenging with a poor credit score, which can be caused by past debt problems or not having taken out much credit previously.
However, because BNPL providers often do a 'soft search' instead of a full credit check, even those with impaired credit might still be accepted.
How do I know whether I have bad credit?
Our guide explains what a bad credit score is and you can find ways to improve your credit score with Credit Score – our free service that lets you keep track of your credit rating, with handy tips to improve it.
Should I use Buy Now Pay Later if I have bad credit?
If you have a poor credit score, Buy Now Pay Later credit agreements can be a double-edged sword.
On one hand, if you meet repayments on time, BNPL could serve as a tool to help improve your credit score.
It is well-suited for individuals who are disciplined with their finances, meet their repayments, and avoid the pitfalls of overspending.
On the other hand, it might not be the best option if you are struggling financially or have a history of missing payments, as the risk of incurring penalty fees and further credit damage is significant.
How will using Buy Now Pay Later affect my credit score?
Buy Now Pay Later can affect credit scores in different ways. Missing payments can harm your credit score, while responsible use can boost it.
It's important to note that not all BNPL providers report to credit reference agencies (CRAs), so it's crucial to check with the BNPL provider if you're worried about how your credit score might be impacted.
What are my alternatives for accessing credit with bad credit?
There are alternatives to BNPL if you have poor credit. These include:
Credit-builder credit card: Credit-building credit cards are designed to help you borrow and potentially improve your credit score. They usually have higher interest rates and lower credit limits, but responsible use can help boost your credit rating
Credit unions: Credit unions offer loans based on affordability, potentially providing a more cost-effective borrowing option than high-street lenders
Loans: Some lenders offer personal loans, secured loans and guarantor loans for those with poor credit ratings. Keeping up with payments could boost your credit score, but missing them could cause further damage
Personal Finance Expert
Our expert says
“Using BNPL can be incredibly tempting. Retailers know this and as such it has thrived in recent years by allowing customers to make quick purchases and then pay them off over time.
"It can be handy if you are disciplined with your finances, but be careful. If you already have bad credit, consider what put you in that situation in the first place and decide whether using BNPL could make the situation worse.”
Other useful guides
Interested in reading more about borrowing with a low credit score? Here are some similar guides:
Comparing credit cards with MoneySuperMarket
While MoneySuperMarket does not offer BNPL, we can help you compare credit-builder credit cards to find the best options for improving credit scores.
We’ll ask a few straightforward questions to match you with a card that fits your needs, including running an eligibility check that won’t harm your credit rating.
You can then see the features of each card, including your chances of being accepted, before deciding whether to click through and apply.
MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead, we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.
What can you buy with BNPL?
Buy Now Pay Later isn't just for small purchases; it can be used for a variety of items, including clothing, holidays, bills, essentials, and more. Some providers even offer a BNPL card for payments, though acceptance varies.
Am I more likely to be accepted for buy now pay later than a credit card if I have bad credit?
It’s hard to judge whether you’re more likely to be accepted for BNPL than a credit card when you have poor credit.
Your likelihood of being accepted will depend on a range of conditions and will be up to the buy now pay later provider or the policy of the credit card issuer. Different providers will have different criteria and thresholds.
Some BNPL providers may be hesitant to let you use their service if you have bad credit. Equally, you could be declined for a credit card or not offered the best rates.
Is Buy Now Pay Later always interest free?
While many Buy Now Pay Later offers are interest-free, sometimes for up to 12 months, it will depend on which scheme you sign up to.
For example, if you choose to pay in instalments, you might find interest is included upfront making the overall amount you pay higher than if you’d bought the item outright.
BNPL can become very expensive if you miss a payment, or make a late payment, and get charged late fees and interest. This can soon make your debt much larger.
What is the impact of having a bad credit score?
Having a low credit score doesn’t just mean you could be turned away from Buy Now Pay Later purchases, it can affect you at any time when you might need credit, such as getting a new mobile phone contract or applying for a first mortgage.
A bad credit score can mean you’re offered higher interest rates on a mortgage or have less choice of lender, when you want to borrow money to buy a house. It could mean you are turned down for a personal loan, or credit card, or offered one at a higher rate of interest.
How can I improve my credit score quickly?
While there is no instant fix to improve your credit score quickly, there are some ways you can give your credit score a boost.
Making sure you’re on the electoral roll, checking your credit report for accuracy (and any errors), paying your bills on time and not using the full amount of credit available to you can help to improve your credit rating.
Take a look at our guide on how to improve your credit score for details.
Can I use buy now pay later to pay for my bills?
There are Buy Now Pay Later companies which allow you to use the payment option to cover your bills. However, using BNPL for this is best avoided.
It’s important to remember that BNPL can come with hefty payment fees and that you don’t choose the dates when you can pay the money back. Using BNPL to pay for your bills could make your financial problems pile up.
How do retailers process Buy Now Pay Later purchases?
When you sign up for BNPL, they’ll have you fill out an online eligibility form to get an instant approval decision.
The approval process is quick and once you have been accepted, the retailer will be paid in full by the BNPL provider. Then you will have to pay the BNPL provider in instalments.
How long do I have to pay off Buy Now Pay Later purchases?
Payment structures differ between BNPL providers, so it's essential to understand the terms of your BNPL agreement.
Providers like Klarna offer interest-free instalments or a pay-in-30-days option, but it's crucial to pay within the agreed timeframe to avoid penalties. Our guide to BNPL explains more, including what happens if you miss a payment.
Is the Government regulating Buy Now Pay Later?
The rise of Buy Now Pay Later has not gone unnoticed by regulators. The Government wants to introduce new rules for BNPL, including protecting payments for faulty goods, affordability checks to ensure loans are manageable for consumers, and clear and non-misleading financial promotions.
They would also like to see all BNPL and the requirement for lenders to be approved by the Financial Conduct Authority.
These measures aim to protect consumers and ensure that complaints can be directed to the Financial Ombudsman Service if necessary.
