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What is PayPal Credit?
PayPal Credit is a revolving credit account, which means it functions much like a credit card. However, it can only be used with merchants who accept standard PayPal accounts. (Those are different from PayPal Credit because they draw funds directly from your bank account or an existing credit card, whereas PayPal Credit is a separate line of credit.)
Like a credit card, your PayPal Credit account will appear on your credit report and affect your credit score. The impact it will have is described below.
How does PayPal Credit work?
As mentioned, PayPal Credit works like a credit card. The difference is that it’s digital, so you won’t receive a physical card.
If you’re approved for PayPal Credit, you’ll have a maximum credit limit of at least $250. 1 You can use this credit in most of the places that you’d be able to use a standard PayPal account. This includes the majority of major online stores, although not Amazon. 2
The APR (the annual cost of borrowing, including interest and fees) on PayPal Credit varies according to the market, but it was 23.99% as of September 2021. For an up-to-date percentage, review the PayPal Credit terms and conditions.
You don’t have to pay an annual fee when you have a PayPal Credit account, but you normally have to pay off your outstanding balances before the monthly due date to avoid paying interest. However, on purchases of $99 or more, you’ll pay no interest for 6 months. 3
Does PayPal Credit appear on your credit report?
Yes, PayPal reports to the credit bureaus, so you’ll likely see your PayPal Credit account on your credit report. 1
However, you may not see information about your PayPal Credit account history from before 2018. This is because in 2018, a lender called Synchrony Bank acquired PayPal Credit and began reporting its accounts to the credit bureaus. 4
If your account dates from before this, it might have previously appeared under a different name or not appeared on your credit report at all.
Will other types of PayPal accounts appear on my credit report?
Some other types of PayPal accounts may also appear on your credit report, but only if they’re credit accounts.
The other accounts that PayPal offers include:
- Standard PayPal accounts: These let you spend money from linked debit cards, credit cards, or bank accounts. If your linked account is a credit account (e.g., a credit card), it might be reported to the credit bureaus, but your PayPal account itself won’t be.
- PayPal Working Capital: This is a type of business loan. PayPal states that they don’t run a credit check on applicants for these loans, so your score won’t be affected by applying for one. 5 These loans are serviced by WebBank, and it’s unclear whether they’ll report your loan payments to the credit bureaus (which would mean paying down the loan would affect your score).
- PayPal Mastercard: PayPal offers two different types of Mastercard—the PayPal Cashback Mastercard and the PayPal Extras Mastercard. These are both credit accounts, and may appear on your credit report. 6 7
How does PayPal Credit affect your credit score?
PayPal Credit can affect your credit score (both positively and negatively) when you do the following things:
1. Apply for PayPal Credit
When you apply for PayPal Credit, PayPal will check your credit and a hard inquiry will appear on your credit report. This will temporarily lower your credit score by a few points. 8
PayPal Credit accounts are serviced by Synchrony Bank, one of the largest banks in the country. They’re the organization that actually will run the credit check on you, which means you might see the hard inquiry appear on your credit report as SYNCB/PPC (short for Synchrony Bank/PayPal Credit).
2. Make or miss payments
Your payment history is a record of your payments on loans, credit cards, and other types of credit accounts. It’s the most important component in the calculation of your credit score.
Making timely payments and paying down your debt are good for your payment history and will improve your credit score. Conversely, missed and late payments will damage your credit score.
In extreme cases, if you go too long without paying back debts on your PayPal Credit account, PayPal will close it and transfer your debt to a debt collection agency. You’ll then probably see a collection account appear on your credit report, and your credit score will take a major hit.
3. Increase your credit limit
Your credit limit is the maximum amount that you can spend on your PayPal Credit account. If you increase your credit limit without also increasing your spending, you’ll lower your credit utilization rate (the proportion of your available credit that you’re using), which will help your credit score.
PayPal may offer to increase your credit limit once you’ve been a PayPal Credit customer for at least 3 months. They may also offer you an increase during their regular review of your credit line. 10
4. Close your account
Closing your PayPal Credit account will likely lower your credit score by increasing your total credit utilization rate. This is because you’ll have less credit available to you across all of your accounts.
Bear in mind that closing the account won’t erase any outstanding debts that were left over. If you can’t pay off your debt first, make sure that you pay off the closed account.
How to open and close a PayPal Credit account
Here are the steps you need to take to open or close a PayPal Credit account:
Opening a PayPal Credit account
To be eligible for a PayPal Credit account, you’ll need to meet the following requirements: 3
- You must be a US-based customer
- You must be of legal age in your state of residence
- You must pass a credit check by PayPal
You can apply for a PayPal Credit account on the PayPal website.
Closing your PayPal Credit account
To close your PayPal Credit account, you contact PayPay Credit’s customer service team by calling (866) 528-3733. Their opening hours are 7 AM to 1 AM ET on weekdays and 9 AM to 11 PM ET on weekends.
Before canceling, make sure you’ve considered the downsides of closing the account, such as the negative effect it’ll have on your credit score.
