Afterpay and your credit score

By   |   Verified by Yvonne Taylor   |   Updated 22nd February 2021

Girl pensive
  • Using Afterpay and concerned that it might be hurting your credit score?
  • Learn when they run a credit check and what they actually report to credit reporting bureaus.

Afterpay surged in popularity because opening an account was so easy, giving debt-wary consumers a new way to fund their lifestyle without the perceived risk of getting into long term debt. But the only thing in life that doesn't change is change itself, and as their customers start "adulting", many are questioning the impact Afterpay may have on their credit score.

Like many questions of a financial nature, there is a little more to how Afterpay affects your credit score than meets the eye. So let's take a look at how it works.

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Do Afterpay run a credit check when opening an account?

According to their credit reporting policy, Afterpay "may check your identity and/or request a credit report about you from a CRB (credit reporting bureau) to help us assess your application for credit".

In plain English, this means that they do not typically run a credit check when opening an account, although they reserve the right to do so.

What do Afterpay report to credit bureaus?

Quoting directly from their credit reporting policy again, Afterpay may report when "you fail to meet your payment obligations in relation to credit provided by us (e.g. if you miss or are late with one or more payments or commit defaults) or if you commit a serious credit infringement".

In other words, they report your missed payments or when you default, but do not report payments collected on time.

An example

You have been using Afterpay for the last year, making repayments on time every fortnight. Due to a delay in processing your salary, your most recent payment was one day late. Afterpay may notify the credit reporting bureaus that you missed a payment, but they will not have reported any of the payments that were made on time for the 11 months before the late payment.

Does using Afterpay help your credit score?

If you use Afterpay responsibly and make your payments on time, then Afterpay will neither help nor hinder your credit score because "positive" behaviour — paying on time — is not reported to credit reporting bureaus.

However, if you do happen to miss a payment, they may report this and it may negatively affect your credit score for some time.

Will using Afterpay rebuild your credit score?

Afterpay do not operate like a credit card or loan. They do not report payments that have been made on time, but they may report missed payments to credit reporting bureaus. Therefore, Afterpay cannot be used to rebuild a damaged credit score.

Is your credit score getting you down? Check out our useful guide full of tips to improve your credit score quickly!

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What to do if you have missed a payment

If you have missed a payment to Afterpay, take these simple steps.

  • Don't panic! It is important to note that while a missed payment to Afterpay may be added to your credit report, it does not mean you will be permanently unable to access new credit.
  • Make sure that there is enough in your bank account so that upcoming payments will be made on time.
  • If you are struggling to make payments due to a lack of cash, then try to reduce your discretionary spending so you don't compound the problem.

Can Afterpay affect new applications for cards and loans?

Since Afterpay do not report successfully collecting your instalments, your responsible management of your Afterpay account will not be visible to a bank when they pull your credit report during an application. However, Afterpay may report missed payments and defaults. The net result of this policy, if you do not have other credit obligations showing your ability to manage your finances, is that your credit score may be an inaccurate reflection of your creditworthiness.

Besides Afterpay's impact on your credit score, banks may consider the use of Afterpay or other Buy Now Pay Later services as a sign that the applicant lacks cash reserves or may be living from paycheque to paycheque. In an article published in the Sydney Morning Herald, Otto Dargan, Managing director at Home Loan Experts, put it this way: "Afterpay creates questions, such as is this person living beyond their means".

Is Afterpay a credit card?

No, Afterpay is not a credit card. There are many differences, but it mostly comes down to interest and repayment schedules.

  • Afterpay does not charge interest on purchases and payments are taken over four instalments.
  • Credit cards charge interest on purchases — once any introductory promotions have elapsed — and debt can rollover from one month to the next with a minimum repayment in the region of 1 - 2% of the debt owed being collected each statement period in addition to interest at the purchase rate.

For a more complete look into how Afterpay and credit cards differ, click here.