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Buy now pay later bad credit

Should I use buy now pay later with a bad credit score?

Victoria Russell
Written by  Victoria Russell
5 min read
Updated: 28 Feb 2024

Buy now pay later allows you to make purchases 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

  • BNPL providers often perform a ‘soft search’ on your credit history instead of a full credit check

  • Even if you have a low credit score due to past debt problems, you may still be accepted for BNPL

  • BNPL can potentially improve your credit score if repayments are made on time

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 credit.

Young woman using laptop

Credit checks for BNPL

When considering BNPL, it's important to understand the credit implications. But 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. 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.

BNPL with bad credit

If you're concerned about your credit score, you're not alone. Acceptance for BNPL might be challenging with a bad credit score due to past debt problems. However, because BNPL providers often do a 'soft search' instead of a full credit check, even those with bad credit might still be accepted. Not sure if you have bad credit? It’s a good idea to keep an eye on your credit score and check it before you apply for buy now pay later. You may find ways to improve your credit score beforehand with Credit Monitor – our free service that lets you keep track of your credit rating, with handy tips to improve it. 

Using BNPL with poor credit score

For those with a poor credit score, BNPL can be a double-edged sword. On one hand, if repayments are met on time, BNPL could serve as a tool to potentially improve one's 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 for those who are struggling financially or have a history of missing payments, as the risk of penalty fees and further credit damage is significant.

Government regulation on BNPL

The rise of BNPL has not gone unnoticed by regulators. In 2022, the Government introduced new rules for BNPL, including affordability checks to ensure loans are manageable for consumers, clear and non-misleading financial promotions, 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.

Impact of BNPL on credit score

BNPL can affect credit scores in different ways. Missing payments can harm the 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 provider to understand how your credit score might be impacted.

Alternatives for accessing credit with bad credit

There are alternatives to BNPL for those with bad credit:

  • 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 and secured loans for those with poor credit ratings. Keeping up with payments could boost your credit score, but missing them could cause further damage.

What can you buy with BNPL?

BNPL 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.

Paying off BNPL purchases

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.

Other useful guides

Interested in reading more about borrowing with a low credit score? Here are some similar guides:

Comparing credit cards with MoneySuperMarket

MoneySuperMarket is here to assist users in comparing credit-builder credit cards to find the best options for improving credit scores. With tools to match users with cards that fit their needs and the ability to check eligibility without damaging their credit rating, MoneySuperMarket serves as a helpful credit broker.

While MoneySuperMarket does not offer BNPL, it provides comprehensive information on credit products and services to help consumers make informed financial decisions.

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.

Frequently asked questions

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 bad 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 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 all 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.

Can I get instant approval on buy now pay later if I have bad credit?

You might be able to but having a low credit score will make it harder.

How do retailers process buy now pay later purchases? 

When a customer signs up for BNPL, they’ll have to fill out an online eligibility form to get an instant approval decision. The approval process is quick and once the customer has been accepted, the retailer will be paid in full by the BNPL provider. Then the customer will have to pay the BNPL provider in instalments.  

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