Afterpay is a buy now, pay later (BNPL) company. It lets you buy products and pay for them in installments over the next few weeks or months.
Some BNPL services let you build credit and others don’t, so it’s natural to wonder whether making payments on your Afterpay account will boost your credit score. The (slightly disappointing) answer is that it won’t—using Afterpay never improves your credit score.
The good news is that Afterpay probably can’t hurt your score, either. Read to learn more about this service and what it means for your credit.
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What is Afterpay?
As mentioned, Afterpay is a buy now, pay later company. If you have an Afterpay account, when you shop at a retailer that they partner with (such as Old Navy or Bed, Bath & Beyond), you can select one of Afterpay’s payment plans when you make your purchase.
Instead of paying all at once, you’ll make one, smaller payment initially, and then pay the remainder of what you owe in several installments (often four, spread over the course of six weeks).
This makes it possible to buy items that are within your budget but that you don’t have enough cash on hand to pay for all at once.
Why doesn’t Afterpay affect your credit score?
When you opt for BNPL financing, you’re essentially taking out a very small loan. Loans generally affect your credit, so it’s slightly unusual that Afterpay’s payment plans don’t.
There are two reasons that Afterpay doesn’t affect your credit:
1. Afterpay won’t check your credit with a hard inquiry
Most of the time, when you apply for a new credit account, such as a credit card or loan, the lender will conduct a hard inquiry, which is a type of credit check. Hard inquiries show up on your credit report and temporarily lower your score by around 5 points.
Some BNPL companies conduct hard inquiries when you apply for certain types of financing with them. Afterpay, however, asserts that they only perform soft credit checks (or soft inquiries), which never affect your credit score and which only you can see on your credit report. 1
It’s common for BNPL companies like Afterpay to only perform soft inquiries. That’s because they want you to use their service frequently, and they know many consumers would be reluctant to do that if every time they applied for financing, it damaged their credit.
2. Afterpay doesn’t report to the credit bureaus
Normally, when you open a credit account, your lender will report your activity on it to one or more of the main credit bureaus, Experian, Equifax, and TransUnion. The bureaus will add the credit account to your credit report, which means it will be factored into the calculation of your credit score.
Some BNPL companies report their loans to the bureaus. Afterpay, however, claims that they never do. This means that using Afterpay can’t possibly affect your credit score, either positively or negatively.
This is both good and bad. The downside is that managing your Afterpay account responsibly won’t build your credit. On the other hand, if you miss a payment, that also won’t hurt your credit score (normally making a late payment causes a damaging derogatory mark to appear on your credit report).
How Afterpay might indirectly harm your credit score
There is one way that it’s possible (albeit unlikely) for Afterpay to hurt your credit. If you completely stop paying off a debt that you owe to them, it’s possible they’ll eventually give up on trying to collect what you owe on their own.
If that happens, they may hire a debt collection agency to pursue you for the debt. These companies, which specialize in collecting overdue debts (as their name suggests), generally do report to the credit bureaus.
If a collection agency goes after you for an unpaid debt that you owe to Afterpay, it will show up on your credit report as a collection account. Collections are very damaging to your credit score, so you should do everything you can to pay off any debts you have before they reach this stage.
Does Afterpay actually work with debt collectors?
Afterpay doesn’t mention on their website whether or not they ever send debts to collectors. This isn’t unusual—companies almost never advertise that this is a possibility.
There are no clear reports online of Afterpay debts being sent to collections. The odds are probably fairly remote, and you don’t need to worry too much about this scenario.
However, it’s important to bear in mind that any overdue debt can be sent to a collector if a company decides to do so (which also means that any debt has the potential to hurt your credit). The key point here is that you should always pay your bills, even if the company says they won’t affect your credit score.
Alternatives to Afterpay that build credit
If were hoping to build credit using Afterpay, it’s probably disappointing to learn that you can’t do so.
Fortunately, there are several alternatives to their service that do build credit. You can try:
- Using another BNPL company: Although Afterpay doesn’t report your payments, several similar companies do. For instance, Affirm affects your credit score (Affirm is one of Afterpay’s main competitors). Note that this can also work against you, as it’s just as easy to inadvertently damage your credit with a BNPL service as it is to build credit, but if you’re careful, you can make it work for you.
- Paying with a credit card: Instead of paying for your purchases with one of Afterpay’s plans, you can use a credit card, which will build your credit as long as you pay it off responsibly. Be aware that, unlike Afterpay, credit cards charge interest if you leave a balance on them from month to month, so it’s best to pay your credit card off in full.
- Taking out a personal loan: If you need to make a larger purchase, an actual loan (from a bank or credit union) might be a better option than a credit card. Loans almost always come with lower interest rates, so they’re a cheaper option if you won’t be able to pay off your purchase within 1 month.
If none of those appeal to you, then you can always just pay for your purchase upfront, in cash. This obviously won’t build credit either, but it does have one key advantage: you can’t possibly financially overextend yourself, which protects your credit.
It’s impossible to have a debt sent to a collection agency (which, remember, can be disastrous for your credit) when you’re only spending your own money and not a loan from another company.