Have you been eyeing the latest gadget but a bit tight on budget at the moment? Or maybe the newly released camera that will surely make your photos pop even more? A new television set to replace your old ones at home that has been used for years already? If yes, you may have considered buying using the popular “BNPL” (Buy Now Pay Later) or Point-of-sale Financing payment method. But how do payment plans like this impact your credit score? Will they leave you in the red and not eligible for any credit in the future? Or will they actually improve your credit score, showing future lenders that you are a responsible consumer?
How Does A “Buy Now Pay Later” Mode Of Payment Work?
If you happen to pass by at the Gadget Section of any malls or even the furniture section, you may have noticed that almost every brand now offers a sort of installment or credit card payment method. This is where a consumer who’s in need of that certain item doesn’t need to pay it right away. Instead, all that is required is filling out an application form to apply and paying back the loan in small monthly installments. This is how “Buy Now Pay Later” works. If you think you are capable of paying for the items over a few months, this is very helpful and convenient since you can already use the product without paying the actual amount upfront.
How Buy Now Pay Later Affects Your Credit Scores
Paying On Time
You may be wondering, “What will happen if my payment is late or early?” Well, paying on time or even earlier than the due date given will give your credit scores a positive impact. This contributes to your reputation as a responsible consumer. When you pay on time, you are implying that you are willing to pay for your loans in compliance with the terms and conditions of the merchant or the lender. Paying on time means getting high credit scores. And, the higher your credit scores are, the more you can apply for other loans in the future. With positive impacts on your credit scores, you won’t have doubts as to whether the loan will be approved or not.
Good Credit History
If you make use of the Buy Now Pay Later method to pay for your merchandise and you pay on time until you finish paying the loans, it becomes a part of your credit history. Good credit history affects your credit scores in a good way. So, coupled with good consideration of your responsibility to pay, the Buy Now Pay Later scheme can actually make your credit scores good.
Late/Default Payments
Do paying installments always make a good impact on your credit scores? The answer is no. Having late payments can result in a negative effect on your scores. How? Late or default payments leave a mark that you missed or didn’t turn in the payment on time. Your future merchants/lenders might doubt your reliability as a consumer and it may prolong the application process as they need to assess your credit history carefully.
Although inevitable due to different factors such as financial problems and emergencies, the best thing to do to avoid it is to look for ways or think ahead of time to save up the needed amount for the payment. Besides, you opted for the Buy Now Later payment rather than cash. If you are willing to get a loan, you should be more than willing to pay for it. Don’t let late payments on BNPL plans be the reason for your credit scores to go down.
Final Thoughts
The first thing that the merchants or lenders look at when a consumer is applying for a loan or a Buy Now Pay Later method is his credit scores. These scores determine your reliability and trustworthiness as a consumer. If your credit history is not in perfect shape, you can still apply for financing from BNPL providers such as ChargeAfter.com. ChargeAfter utilizes a multi-lender platform that enables customers to apply for the loan from various prime, near-prime, and subprime or (lease to own) lenders, which improves your chance of getting approved for the financing.
The higher your credit scores, the better. However, remember that just because you are approved for instant financing, it doesn’t mean that your credit scores will improve. You still need to do your part as a borrower, such as paying on time, adhering to the due dates, paying the interest, and making sure that you zero out your outstanding loans.