Do BNPL Schemes Affect Your Credit Score?

In today’s world, your credit score represents your financial situation and stability. Your low credit score can have people questioning your trustworthiness & finance management abilities. 

Many people are using Buy Now Pay Later to get instant credit, but are these BNPLs a boon or bane for your credit score? 

Let’s first know the factors that make your credit score.

Factors That Influence Your Credit Score:

1. Payment history: The most important component of a credit score is payment history, and even a single missed payment will damage your score. Lenders want to know that you will repay your bills on time when evaluating you for new credit. Your payment history accounts for around 35% of your credit score.

2. Credit utilisation: The credit utilisation ratio is used to calculate credit usage, which accounts for 30% of your credit score. This ratio indicates how much of your available credit you are utilising and your reliance on non-cash resources. Credit usage should be kept around 30% since lenders view anything beyond that as a red flag.

3. Credit history length: The length of time your credit accounts have been open accounts for 15% of your credit score. It covers the average age of all your accounts, as well as the length of your oldest and newest credit accounts. A longer credit history is beneficial to your credit score.

4. Credit mix: Having diverse credit accounts, like car loans, credit cards, student loans, etc., can increase your credit score as it shows how well you can handle different credit products. Credit mix makes up 10% of your credit score.

5. Hard Inquiry: Every time you apply for a new credit account, the lenders perform a hard inquiry by pulling up your credit report to determine your creditworthiness. Hard inquiries lower your credit score and make up for 10% of it.

How BNPL schemes can affect your credit score

  • A good option for people new to credit: If you’re new to the world of credit, availing of a BNPL can help build your credit score without having to take out huge loans like home loans & car loans. 
  • Improve payment history: If you’re stuck with a low credit score, availing of a BNPL is a good solution. BNPL allows you to rebuild your credit score by making affordable and simple payments on time.
  • Can damage your credit score: Just like any other loan, BNPL schemes can prove detrimental to your credit score in case you end up missing a payment or two. These defaulted payments are reported to the credit bureaus and reflected on your credit report.
  • No hard inquiry: Unlike credit cards and most loans, BNPL schemes do not perform a hard inquiry; instead, they opt for a soft credit check. These soft credit checks have little to no effect on your credit score.

How to Apply for the Buy Now Pay Later Feature of Your Favorite E-com Stores!

To apply for the best e-commerce store’s Buy Now, Pay Later services, you need the CASHe app, your salary slips, and accurate personal details. 

Follow these simple steps to avail yourself of a loan for your shopping spree:

Step 1: You must first download the CASHe app to use CASHe’s products.

Step 2: After downloading the app, you have to create your profile on the app. You will be asked to provide your details, like name, birth date, PIN code, city, etc.

Step 3: When you open CASHe’s app, you will notice a shopping icon on the home page. When you click that icon, all of the shopping BNPL services, such as Amazon BNPL, Myntra BNPL, and Big Basket BNPL, will appear on your screen.

Step 4: Click on the app’s logo for which you want a loan, and the app will show you the app’s Buy Now, Pay Later options.

Step 5: Choose your loan amount, loan term, and EMI option.

Step 6: After selecting your loan details, CASHe will show you an overview of your loan details. At this stage, in case of a change of plans, you can make the changes before confirming the details.

Hit “Confirm Details,” and your details will be verified. As soon as your loan is approved, the loan amount is deposited into your Amazon Pay account without any delay.