Frequently asked questions

When shopping today, you may see an offer to pay for the item you're purchasing with just a few equal payments. These types of offers are known as “buy now, pay later” or BNPL loans or financing. Many consumers enjoy the convenience and flexibility of splitting payments, but you need to understand how these options work and how they might affect your credit. This page provides important information to enable you to take advantage of the benefits of BNPL loans without damaging your creditworthiness.

BNPL stands for "buy now, pay later."

A BNPL loan refers to a payment method that allows consumers to make a purchase, typically with a down payment, and pay for it over time. With the most common BNPL type (referred to as “pay-in-4”), payments are split into four equal installments or biweekly payments over 6 weeks, without any interest or fees, as long as the terms are met on time, with no late payments. Some lenders may charge additional fees.

A BNPL loan offers consumers an alternative to using traditional credit cards or personal loans to make purchases. Some benefits include:

  • Flexibility: BNPL loans allow customers to split their payments into installments of two, four or six weeks or more. The pay-in-4 model is one of the most common.
  • Interest-free periods: Many BNPL lenders allow customers to make purchases without paying any additional interest charges, as long as they repay the full amount within the specified period. 
  • Easy application process: Applying for a BNPL loan is usually quick and straightforward. Some BNPL options may even involve a soft credit check during the application process, which won’t affect your credit score.
  • Convenience: BNPL options are often integrated into the checkout process online, making the process of paying and using this type of financing option convenient for consumers.  
  • Budgeting: Consider your current financial situation and income and determine if you can comfortably afford the repayments. Add the projected payments into your budget to ensure you’ll still be able to meet your other financial obligations. 
  • Interest rates and fees: Research and compare the interest rates and fees associated with different BNPL providers. Some lenders may charge additional fees. Late payment fees are one example, so make sure you understand the terms and conditions.
  • Repayment period: Consider the length of the repayment period. BNPL loans typically have shorter repayment terms (typically 6 weeks) compared to traditional loans. Make sure you can repay the loan within the specified time frame without causing financial strain. 
  • Impulse buying: Be mindful of the temptation to make impulsive purchases with BNPL loans. Not having to pay upfront can make it easier to overspend, so be sure you use this credit option responsibly and can comfortably afford the payments. There's still typically a payment upfront.
  • Building credit history: As BNPL information is more widely reported to Experian, accounts may be visible to lenders, which can show a payment history for those accounts.  

The information won't be factored into existing traditional credit scores at this time but may in the future as new credit scoring models are developed. Policies may differ at the other national credit reporting companies — Equifax and TransUnion.

See “How does a BNPL loan impact my credit score?” above. BNPL loans represent additional debt that could affect a person’s ability to repay other financial obligations so, reasonably, should be part of a credit history. As of today, the scoring models that exist — and are most commonly used by lenders — aren't designed with BNPL in mind but, as previously stated, they may in the future as new credit scoring models are developed.

As BNPL information is more widely reported to Experian by BNPL providers, a consumer’s BNPL history will be visible to lenders that request an Experian credit report. This enables them to make more informed decisions when determining whether to extend credit offers. For that reason, you should be mindful about how much BNPL debt you have at any given time.

As stated in the previous question, as BNPL information is more widely reported to Experian, lenders will have greater visibility into BNPL histories. If you use BNPL loans responsibly, don’t take on more debt than you can manage and make all your payments on time, your BNPL payment history could enable you to qualify for new credit and other forms of credit in the future.

If you have a BNPL loan that’s currently reported to the credit bureaus, it could potentially impact your ability to get new credit if you don’t make your payments on time.

When a BNPL loan is reported to Experian, it will appear in the credit report similarly to other loans but will be clearly marked as a BNPL loan.

Experian's consumer credit report is designed to be easy to read and understand. It’s written in simple language with no strange abbreviations or coding.

Consumer credit reports include four types of information: 

  1. Identifying information: Your name and any previous names you’ve used to apply for credit or other services, current and previous addresses, telephone number, reported variations of your Social Security number, date of birth, employer and your spouse's or co-applicant’s name.
  2. Account history: Specific information about each account, such as the date opened, credit limit or original loan amount, balance, monthly payment amount, payment status and payment history. The report also shows your association with the account (individual, joint, authorized user, etc.), which indicates whether anyone else besides you (your spouse or cosigner, for example) shares responsibility for paying the debt. This information comes from companies that do business with you. For open accounts, positive credit information may remain on your report indefinitely, which is good for your credit history. Most negative information remains up to seven years. Closed accounts with no negative information remain for 10 years from the date closed, helping you establish a positive credit history over time. 
  3. Bankruptcy public records: Federal bankruptcy filings are the only type of public record you’ll see in an Experian consumer credit report. The two most common types of bankruptcy filed by consumers are Chapter 7 and Chapter 13, which remain part of your credit history for 10 years and seven years from the filing date, respectively.
  4. Credit inquiries: A record of those who have requested your credit history. Inquiries initiated by you may be shared with lenders and may affect lending decisions. Depending on the type of inquiry initiated by you, they may or may not be included in credit score calculations. Inquiries that aren't initiated by you — such as reviews of your credit report by existing lenders, and other instances, such as requesting your own report — won't affect your score.

Consumer reports will also show details about your BNPL account, including:

  • Monthly payment: Regardless of the pay period for your account, payment amounts are converted to a monthly payment value.
  • Original balance: Original balance is the amount consisting of the installment payments and may or may not include the initial down payment depending on how your account is structured.
  • Term: Regardless of the period specified for the term of your account, terms are converted to a monthly value. For example, a 6-week period will appear as 2-months. 
  • BNPL loans generally are in the form of installment loans you repay on a set schedule with equal payments. Credit cards are a type of revolving credit, which allow you to borrow repeatedly up to a set credit limit while making at least minimum payments. Some BNPL loans are now taking on characteristics of revolving accounts, such as having a borrowing limit, making them appear more like revolving debt.
  • It’s typically easier to get approved for a BNPL loan compared to many credit cards.
  • BNPL loans require you to set up a new agreement (with its own terms) each time you use it to make a purchase, which means tracking payment due dates for multiple purchases. Credit cards allow you to make purchases up to your credit limit and receive one bill per month to pay for those purchases. 
  • BNPL loans typically don't charge interest, unless the loan’s terms and conditions aren't met (for example, late or missed payments). Credit cards charge interest on purchases that revolve, or aren't paid in full, by the card's due date (with the exception of 0% introductory APR cards). 
  • Credit cards may offer user perks and benefits such as rewardspurchase protectiontravel protection and more, while BNPL loans generally don’t. 
  • Credit cards typically require a credit check when you apply, affecting your credit score; BNPL loans usually don’t.

A very wide range of products can now be purchased using BNPL, and that range is growing rapidly. However, some BNPL lenders may have specific agreements with merchants or retailers, limiting the types of products or services that can be purchased using their loan platform. These restrictions can vary based on the lender and the specific terms of the loan. Some examples of restrictions may include financial products, gift cards and digital currencies.

BNPL loans often come with limits on the amount you can borrow for each purchase. These limits can vary depending on factors such as the BNPL lender being used, your payment history with that lender, how long you've been a customer of that BNPL lender and the specific retailer you're purchasing from. The loan amounts and length/terms of the loans can also vary greatly among different lenders.

It's important to check the BNPL lender’s terms and conditions to understand any limits on purchase amounts. 

In many cases, you can pay off a BNPL loan early without incurring additional fees.

However, it's important to note that each BNPL lender may have different policies regarding early repayment. Some lenders may allow early repayment without penalties, while others may have certain conditions or charges associated with early repayment.

Review the terms and conditions of your specific BNPL loan or contact your lender directly to confirm their policies regarding early repayment and any potential fees.

If you're unable to make the full payment on a BNPL loan by the due date, there can be various consequences depending on the specific terms and conditions set by the lender. Here are some potential outcomes: 

  • Late fees: Many BNPL lenders charge late fees if you fail to make the full payment by the due date. These fees can vary in amount and may be applied as a fixed fee or as a percentage of the outstanding balance. 
  • Interest charges: Some BNPL providers may start charging interest on late payments. It's important to review the terms and conditions to understand if and when interest will be applied. 
  • Impact on credit scores: If you fail to make the full payment or make late payments, it could indirectly impact your credit score. If the BNPL provider sends your account to a collection agency, it can be reported as a collection account on your credit report, which could negatively affect your credit scores.
  • Restricted account access: In some cases, if you consistently miss payments, the BNPL lender may restrict your account access or suspend future usage until the outstanding balance is paid. This can affect your ability to make additional purchases using BNPL services. 

It's important to remember that the consequences may vary depending on the specific BNPL lender and its terms. To avoid these outcomes, carefully review the terms and conditions of the BNPL agreement before making a purchase, budget for timely payments and communicate with the provider if you anticipate any difficulties in making the full payment by the due date. 

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