How buy now pay later could impact your credit score 

Buy Now, Pay Later (BNPL) may seem like an easy way to spread the cost of purchases, but it could come with a costly sting in the tail.  

Credit reporting agency Equifax reports BNPL applications surged 30% in the June quarterⁱ, and the trend could be quietly chipping away at shoppers’ credit scores. Here’s how it works — and what you can do to protect your rating.

What is Buy Now Pay Later, and how does it work?

BNPL is a type of digital finance that allows you to purchase items immediately and spread the payments over time. Some buy now pay later arrangements are also offered through credit card networks such as Mastercard and Visa.

Much of BNPL’s appeal lies in the way it works. Shoppers take the purchases home today and pay them off in a series of instalments. As long as you don’t fall behind with the specified payments, no late fees or interest charges apply.

There is, however, an indirect cost to shoppers. BNPL providers generate the majority of their revenue by charging retailers a fee. This typically works out to be between 2% and 8% of BNPL transactionsⁱⁱ, a cost that’s likely to be passed on to consumers in some way.

Buy Now Pay Later and your credit score

Since 10 June 2025, Buy Now, Pay Later has been regulated under the National Consumer Credit Protection Actⁱⁱⁱ, requiring all BNPL providers to conduct a credit check whenever someone applies for a BNPL product. Therefore, how you use BNPL providers can directly shape your credit health.

1. Credit checks: Each BNPL application will trigger a credit check. This enquiry is recorded on your credit report and can influence your credit score.

2. Repayment history: Paying your BNPL bills on time can help boost your credit score. But just as missed or late payments on a credit card or home loan are reported, missing BNPL repayments can also damage your credit rating.

3. Impact on loan applications: When you apply for a mortgage or other loans, lenders will review your BNPL repayment history. They’ll consider any outstanding debts, how reliably you’ve made repayments, and your broader financial behaviour when deciding your creditworthiness. Like with any type of debt, a poor credit score caused by missed BNPL repayments won’t help your ability to get a mortgage or car loan.

Know the risks and use them responsibly

While BNPL offers clear benefits, it’s essential to remember that it is still a form of credit and comes with associated risks. If you’re keen to keep using BNPL without affecting your long-term financial health, the good news is you can — provided you use it wisely and keep these tips in mind.

1. Check your budget: Treat BNPL repayments like any other expense. Factor them into your budget so you always have enough funds set aside to pay on time.

2. Understand the terms & conditions: Each BNPL provider has different rules. Be aware of the fees, charges, and repayment schedules before committing.

3. Less is best: Juggling multiple BNPL accounts can make it hard to track spending. Stick to one account, or keep your BNPL purchases low, so repayments stay manageable.

4. Set up auto payments: Avoid late fees or missed repayments by setting up automatic transfers from your bank account.

5. Keep an eye on your credit report: Regularly check your credit score with agencies such as Equifax, Experian, and illion. These bureaus track your credit applications, repayment history, defaults, and BNPL activity, which is information that lenders consider when assessing loan or mortgage applications.

^Sources:

^{i https://www.equifax.com.au/knowledge-hub/news-and-media/property-dreams-becoming-closer-reality-more-australians-first-home-buyer-intent}

^{ii https://www.grantthornton.com.au/insights/blogs/true-cost-buy-now-pay-later/}

^{iii https://www.asic.gov.au/regulatory-resources/credit/buy-now-pay-later-credit-contracts-credit-licensing/}