Does Buy Now Pay Later Affect Your Credit Score?

Significant changes are arriving for Buy Now Pay Later (BNPL) services in Australia that may impact your credit score. As of June 10, 2025, Australian BNPL providers will operate under similar credit laws that apply to credit cards, personal loans, and home loans. 
 

What is Buy Now Pay Later and How Does it Work in Australia?

Buy Now Pay Later (BNPL) is a type of digital finance that lets you purchase items immediately and spread the payments over time. Popular BNPL service providers in Australia include Zip Pay, humm, Afterpay, Klarna and PayPal. Rather than paying upfront, you can spread costs over time, and generally, you won’t be charged interest or fees if you make repayments on time. BNPL services typically offer quick approval, making it an easy and convenient payment option.

How Buy Now Pay Later Services are Changing in Australia

To enhance consumer protection, the Australian Government is introducing stronger regulation for BNPL services. Starting June 10, 2025, BNPL will be subject to the National Consumer Credit Protection Act. 

This change requires BNPL providers to hold a licence from the Australian Securities and Investments Commission (ASIC) and join the Australian Financial Complaints Authority (AFCA), ensuring consumers have access to free, impartial support in case of disputes. 

BNPL providers must also establish strategies to assist customers experiencing financial hardship and are required to adhere to responsible lending practices. These practices involve assessing a customer's ability to manage the debt, ensuring the credit is not unaffordable. While these requirements align with those for other credit types, BNPL providers will be able to use a simplified approach for assessing affordability in order to maintain the convenience of using BNPL services.

For you, the consumer, this means a more regulated environment with increased protection and transparency.
 

Buy Now Pay Later and Your Credit Score

Under the new regulations, how you use BNPL may impact your credit health. Here’s how:

• Credit checks: Every application for BNPL in Australia will likely involve a credit check. This credit enquiry will be recorded on your credit report and may influence your credit score.
• Repayment history: Consistent, on-time payments on your BNPL plans may positively affect your credit score. On the other hand, missed or late payments may be reported and may negatively impact your credit rating, just like defaulting on a credit card or other loan.
• Impact on loan applications: Lenders will consider your BNPL usage when assessing mortgage and other loan applications. Outstanding BNPL debts, repayment history, and your overall financial behavior will all be factored into decisions about your creditworthiness.
   

Benefits of BNPL

One key benefit of BNPL is budget management, as you can spread the cost of purchases over time, making it easier to manage expenses and avoid large upfront payments. BNPL services also gives you the flexibility to manage your finances in a way that suits your situation, whether to handle unexpected expenses or take advantage of sales.

Importantly, under the new regulations, credit building is possible with BNPL if used correctly. Making timely payments on your BNPL plans may positively contribute to your credit history, potentially improving your credit score over time.
 

Risks of Buy Now Pay Later

While the benefits of BNPL are evident, it's crucial to understand that BNPL is a form of credit, so the way you use it could impact your financial health. Incurring defaults, paying late or borrowing excessively may damage your credit score, potentially affecting your future financial opportunities. It’s vital to seek support from lenders if you are experiencing financial difficulties.

Tips on using Buy Now Pay Later responsibly​

Keen to keep using BNPL but don’t want to impact your long-term financial health? The good news is that you can use BNPL wisely by keeping these tips in mind:

Check your budget​

Treat BNPL repayments like any other expense. This means including your BNPL repayments in your budget so you have enough funds set aside to make repayments.

Understand the terms & conditions ​

Each BNPL service has different rules. Understand the fees, charges, and repayment schedules before committing.

Less is more

It can be hard to keep track of your spending if you have multiple BNPL accounts across different providers. Try using the one account or keep your BNPL purchases low so you can keep on top of them.

Set up auto payments

Avoid any missed repayments or fees or levies by setting up automated transfers from the available funds in your bank account. 

Keep an eye on your credit report​

Check your credit score regularly through Equifax. You can see if any unsecured credit or BNPL accounts have been recorded and if this may have impacted your score. 

At Equifax, we also offer a subscription service that will automatically notify you of any changes to your credit file. These changes will include when a lender accesses your report and when adjustments occur.

BNPL services can be a great way to help you manage your budget, but they can also affect your credit score. With the right strategies in place, Australians can make the most of BNPL services without negatively impacting their credit scores.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.