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How Does Afterpay Affect Your Credit?

  • Auto Refinance
  • Nova Kainen
  • 6 minutes

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Are you one of those online shoppers who rely on Afterpay to do your shopping? Afterpay is a buy now, pay later option that helps you to shop without making the whole payment all at once. Does Afterpay affect your credit? Continue reading to know the effect of Afterpay on your credit.  

does afterpay affect credit

What is Afterpay?

Afterpay is a financial technology company that aims to offer BNPL or buy now, pay later services to those who purchase online. This technology allows you to do your online shopping at your convenience and make payments later. 

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How does Afterpay work?

Once you are done with your purchase, you don’t have to make the complete payment. The initial payment should be made immediately after the purchase. After that, you’ll receive a bill for the balance amount, which you will have to pay as equal payments until it’s paid in full (with no interest charged). 

Through the BNPL services, you can purchase items with prices ranging from below $100 to several thousand dollars. BNPL companies, in general, will not do deep research about a person’s credit history. Afterpay does not perform credit checks, and they do not generally report late payments. 

Afterpay payment options make online shopping easier for you. But do the BNPL services affect your credit score or your credit history? 

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How does Afterpay affect credit?

Using Afterpay won’t have any effect on your credit rating. Afterpay does not run credit checks or disclose late payments, two factors that might have a negative effect on a person’s credit score. They don’t prefer to keep you out of Afterpay just because you’ve had a debt in the past. 

They believe that a missed payment through Afterpay should not negatively affect your credit when the typical purchase is under $150. Afterpay, ensure that you make timely payments; if not, they will temporarily freeze your account. 

But if you frequently miss out on payments, there are chances that Afterpay reports negative activity on your account, which can affect your credit score.  

AfterPay’s minimum credit limit is around $500, but it can rise over time if the user makes regular payments without falling behind or defaulting. After a few months, clients have a maximum purchase limit of $1,500 and a total AfterPay credit limit of $2,000.  

AfterPay’s widespread acceptance can be attributed to the flexibility it affords customers in terms of when and how they make payments within the constraints of an agreed-upon payment schedule and time frame set by the business. 

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How to use Afterpay responsibly?

To avoid financial trouble, you must know how to use your Afterpay account responsibly. Here are a few things: 

  • Separate some amount monthly as your Afterpay budget so that you won’t struggle to make the payments. 
  • Reschedule your payments if you know in advance that you won’t be able to repay on time.  
  • Link your debit card to your Afterpay account. 

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By following these steps, you can avoid missing out on any payments and any negative activity on your account.  

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Are there any fees to use Afterpay?

When payments are made on time, no fees are assessed, and no interest is accrued when using the Afterpay service. You will only be charged a late fee if your scheduled payments are not processed within the allotted grace period. 

As a courtesy, Afterpay sends you payment reminders in the days up to the due date to help you stay on track and avoid late fees. They charge you a late fee starting at $10 and can go up to 25% of the order total. 

Is it wise to use Afterpay?

If payments are made on time, borrowing from Afterpay, a reputed provider of BNPL loans, is a safe option. Before committing to a loan through Afterpay, be sure to read their terms thoroughly. 

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Here are the different reasons why you should opt for Afterpay. 

  • Afterpay is a risk-free BNPL option, and they offer a zero-interest payment plan for you if you are an online shopper. 
  • Afterpay will not let you accidentally fall behind on your payment plan. They set up automatic payments for you, and on each due date, they will take the money from your account if there is sufficient balance. They will send you a reminder to remind you of the due date. 
  • Among BNPL services, Afterpay’s Pulse Rewards program is particularly advantageous. In exchange for prompt repayment, you can accumulate points that can be redeemed for various benefits. Gaining access to special discounts or gift cards or delaying payments for up to seven days are all possible outcomes of accruing points. 

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Who should not choose Afterpay?

Afterpay is not the right choice for all. People sometimes choose Afterpay with different expectations but usually get disappointed. To avoid that, you should know beforehand what you should not expect from Afterpay.  

Here are some details you should know about Afterpay. 

Will not usually help to build your credit

Afterpay will not report your payment history to the credit bureaus. Hence, if you plan to join them to build your credit score, Afterpay is not the right choice. To qualify for further financing options like credit cards or loans, it is necessary to establish a good credit history. 

Charge a late fee for missed payments

As mentioned before, they charge a late fee if you miss out on your payments. If you do not prefer to pay any fees, you should look for other BNPL options. 

Encourage you to overspend

Afterpay will likely improve your credit limit as you make additional purchases and successfully pay them off. This feature could tempt you to spend more than you can afford, putting you further behind on your financial goals, like saving for an emergency or paying down debt. 

Bottom line

If you are an Afterpay user, it is recommended that you make the purchase using a debit card rather than a credit card to avoid money drain. Afterpay is safe if you are sure you will not miss out on any payments and make the payments responsibly. Shop sensibly using Afterpay without spending more than you can afford.   

does afterpay affect credit

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