Does Afterpay Affect Your Credit Score?
Buy Now Pay Later (BNPL) services have revolutionised how Australians shop and manage their finances. Recent data shows that 43% of Australian adults have used BNPL services in the past six months, with Afterpay leading the market as the most popular choice among consumers.¹ With over 3.5 million active customers in Australia and transaction volumes continuing to grow, many are asking: does Afterpay affect credit score outcomes?
Understanding the relationship between Afterpay and your credit score is crucial for making informed financial decisions. This guide will explore whether using Afterpay can affect your credit score, how Afterpay’s credit checks work, and what you need to know about using Buy Now Pay Later (BNPL) services responsibly.
We'll also discuss how personal loans from trusted lenders, such as Credit24, may complement your financial toolkit by providing flexible options when you need them most.
What is Afterpay and how does it work?
Afterpay is one of Australia’s leading Buy Now Pay Later (BNPL) services. It lets you buy items straight away and spread your repayments over time, typically without paying interest if you meet the agreed repayment schedule. The platform operates on a simple four-installment payment structure spread over six to eight weeks, making it an attractive alternative to traditional credit cards.
When you make a purchase with Afterpay, you typically pay the first installment (25% of the total) at checkout, with the remaining three payments automatically deducted from your nominated debit or credit card every two weeks. New customers usually start with a credit limit between $600–$1,500, which can gradually increase based on payment history and responsible usage.²
The approval process is designed to be quick and seamless. Afterpay uses instant approval technology that assesses your eligibility in real time without requiring extensive paperwork or lengthy waiting periods. This streamlined approach has made it particularly popular among younger demographics who value convenience and transparency.
However, there can be consequences for missed payments. If you're late with a payment, Afterpay usually charges a $10 late fee initially, followed by an additional $7 fee if the payment remains unpaid seven days after the due date. For orders under $40, late fees are typically capped at 25% of the original order value, while larger orders are subject to a maximum of $68 in total late fees.³
Does Afterpay check your credit score?
The short answer to "does Afterpay do credit checks" is: it depends on your situation. For most new customers in Australia, Afterpay may conduct a soft credit check during the initial signup process, but this does not affect your credit score.⁴
Understanding the difference between soft and hard credit checks is crucial when considering how Afterpay may impact your credit score.
Soft credit checks (also called soft pulls or soft inquiries) are used by Afterpay for initial assessments. These checks:
● Can have minimal impact on your credit score
● May not be visible to other lenders or creditors
● May or may not be recorded in credit reports, depending on the credit bureau
● Can help to determine your initial spending limit
Hard credit checks involve a comprehensive review of your credit history and:
● Can temporarily lower your credit score by a few points
● Are often visible to other lenders for up to five years
● Are typically required for traditional loans and credit cards
Afterpay primarily relies on soft credit checks for new customer onboarding, which means most users won't see any immediate impact on their credit score from simply signing up and using the service responsibly.
Does Afterpay affect your credit score?
The question "does Afterpay affect your credit score" has both direct and indirect answers that every user should understand.
Direct impacts on your credit score:
For regular use and on-time payments, Afterpay generally does not affect your credit score. The service does not usually report your payment history to credit bureaus like Equifax, Experian, or illion, which means your perfect payment record with Afterpay won't help build your credit history.⁵
However, if you apply for a credit limit increase beyond your standard limit, Afterpay may perform a credit check to assess your eligibility. This process is designed to ensure that increased spending limits align with your financial capacity.
Indirect impacts on your credit score:
While Afterpay itself may not directly report to credit bureaus, your usage patterns can indirectly affect your creditworthiness in several ways:
Bank statement visibility:
Late fees and multiple BNPL transactions usually appear on your bank statements. Lenders may look at these when assessing your loan application. Excessive BNPL usage or frequent late fees can raise concerns for potential lenders.
Debt-to-income ratio:
Multiple active BNPL accounts contribute to your total debt obligations, potentially affecting your borrowing capacity for mortgages, personal loans, or credit cards.
Payment prioritisation:
Some users may prioritise BNPL payments over other bills, which can lead to missed payments on credit cards, utilities, or loan repayments that do get reported to credit bureaus.
When Afterpay might perform credit checks:
● Initial account setup (soft check only)
● Applications for significant credit limit increases
● If you apply for Afterpay Plus or other premium services
● During investigations of suspected fraudulent activity
Missed payments and credit reporting:
Currently, Afterpay may not report all missed payments to credit bureaus in Australia. However, if you consistently fail to meet your repayment obligations and your account remains in significant arrears, the company may reserve the right to refer your debt to collection agencies, which could then impact your credit record.
Can using Afterpay improve your credit score?
Many consumers wonder "does Afterpay help credit score" improvement, hoping that responsible BNPL usage might boost their credit rating. Unfortunately, the answer is generally no – regular Afterpay use doesn't help to build credit in Australia.
Unlike traditional credit products such as credit cards or personal loans, Afterpay does not report positive payment history to credit reporting agencies. This means that even if you make every payment on time for years, this responsible behaviour won't be reflected in your credit score or help establish a positive credit history.
Why Afterpay doesn't build credit:
The primary reason Afterpay doesn't report to credit bureaus is philosophical – the company positions itself as an alternative to traditional credit rather than a credit-building tool. Afterpay's business model focuses on providing interest-free payment flexibility without the complexity of credit scoring and reporting.
Contrast with traditional credit-building methods:
If your goal is to improve your credit score, you can consider these alternatives:
● Credit cards: Responsible use with regular payments and low utilisation ratios
● Personal loans: Fixed-term loans with consistent repayment history
● Utility bills: Some providers now report positive payment history
● Secured credit cards: Designed for building or rebuilding credit history
Afterpay vs traditional credit lines
Understanding how Afterpay compares to traditional credit options helps clarify its role in your financial strategy and its impact on credit score considerations.
Interest and fees comparison:
Afterpay charges no interest on purchases when payments are made on time, unlike credit cards that typically charge 15–25% annual interest rates. Traditional credit cards may also include annual fees ranging from $0–$700, while Afterpay is usually free for on-time payers.
Repayment structure differences:
Afterpay usually operates on a fixed eight-week payment schedule with four equal installments, providing predictable repayment dates. Credit cards, on the other hand, can offer ongoing credit with minimum payment requirements, which can lead to revolving debt if not managed carefully.
Credit limits and accessibility:
New Afterpay users start with lower limits ($600–$1,500) compared to credit cards that may offer $2,000–$20,000+ limits depending on creditworthiness. However, Afterpay's approval process is generally more accessible for those with limited credit history.
Consequences of missed payments:
Credit card late payments are typically reported to credit bureaus and can significantly impact your credit score. Afterpay late payments result in fees but aren't reported to credit agencies, though they can affect future loan applications through bank statement analysis.
How Afterpay affects loan applications
When applying for mortgages, personal loans, or other credit products, lenders increasingly scrutinise BNPL usage patterns. Understanding whether Afterpay affects credit score assessments during loan applications is crucial for future borrowing success.
Lender assessment practices:
Most Australian lenders now specifically ask about BNPL usage during loan applications and review the last three to six months of bank statements. They treat existing Afterpay balances as current debt obligations, which directly affects your debt-to-income ratio calculations.
Borrowing capacity impact:
Regular Afterpay usage, even when managed responsibly, can reduce your overall borrowing capacity for major loan applications. Lenders may apply a buffer to account for your potential maximum BNPL exposure, not just your current balance.
Potential red flags for some lenders:
● Multiple active BNPL accounts across different providers
● Frequent late payment fees appearing on bank statements
● High proportion of income going toward BNPL repayments
● Using Afterpay for essential purchases like groceries or utilities
Home loan considerations:
Mortgage lenders may be cautious about frequent BNPL use, as it can sometimes indicate financial pressure or challenges managing repayments. Some lenders may require you to close BNPL accounts before approving a home loan, while others may offer reduced borrowing limits.
Tips for responsible Afterpay use
To minimise any negative impact of Afterpay on credit score considerations and maintain healthy financial habits, follow these evidence-based strategies:
Payment method optimisation:
Link Afterpay to a debit card rather than a credit card. Internal Afterpay data shows that customers using debit cards have 66–73% lower missed payment rates compared to those using credit cards.⁶ This approach can also help to prevent debt compounding if you miss an Afterpay payment.
Payment management strategies:
Set up calendar reminders for payment dates, as Afterpay installments don't always align with regular pay cycles. Consider using smartphone apps or calendar notifications to track upcoming payments across all your BNPL accounts.
Account limitation approach:
Limit yourself to one BNPL account at a time to maintain better oversight of your commitments. Multiple BNPL accounts can quickly become overwhelming and increase your risk of missed payments.
Spending ratio guidelines:
Some people find it helpful to keep their total BNPL purchases under 10% of their monthly income. This conservative approach can make it easier to stay on top of repayments and avoid BNPL commitments affecting essential expenses or other debts.
Regular monitoring:
It can help to review your bank statements monthly to track BNPL-related transactions and fees. This practice can help you identify spending patterns and make adjustments before they affect your overall financial health.
Frequently asked questions
Will missed Afterpay payments affect my credit score?
Currently, Afterpay does not report missed payments directly to credit bureaus in Australia. However, late payment fees will appear on your bank statements, which lenders review during loan applications. Persistent non-payment could result in debt collection, which may then impact your credit record.
Does Afterpay report to credit bureaus?
Afterpay doesn’t routinely share your payment history with credit reporting agencies. They may conduct soft credit checks for new customers and credit limit increases, but your regular BNPL use and payment history are not usually reported to agencies like Equifax or illion.
Can I get a home loan if I use Afterpay?
You may still be able to qualify for a home loan while using Afterpay, but your BNPL usage may be assessed as part of your overall financial position. Lenders usually review your bank statements and may reduce your borrowing capacity based on your BNPL commitments and payment patterns.
What happens if I can't make an Afterpay payment?
If you can't make an Afterpay payment, you can contact them promptly to discuss options. Your account may be paused until the balance is paid, preventing further purchases. Late fees apply (typically $10 initially, then $7 after seven days), and persistent non-payment may lead to debt collection.
Is Afterpay a line of credit?
Technically, Afterpay is not a traditional line of credit. It's classified as a "continuing credit contract" under Australian law, which means it operates differently from standard credit cards or personal loans. You're not borrowing money in the traditional sense, but rather entering into a payment arrangement for specific purchases.
Does Afterpay increase credit score?
No, Afterpay does not increase your credit score. The service doesn't report positive payment history to credit bureaus, so even perfect payment performance won't improve your credit rating. If you want to build credit, consider traditional credit products like credit cards or personal loans.
Will Afterpay affect credit score if I never miss payments?
If you never miss payments and use Afterpay responsibly, it generally won’t directly impact your credit score. However, your BNPL spending patterns shown on bank statements may still influence future lending decisions, especially for larger loans like mortgages.
Does Afterpay affect credit score in Australia differently than other countries?
Yes, Afterpay's credit reporting practices vary by country. In Australia, the service generally doesn't report to credit bureaus, while in other markets like the United States, reporting practices may differ. Always check the specific terms for your country of residence.
Is Afterpay bad for your credit score?
Afterpay itself is not inherently harmful to your credit score if used responsibly. Problems arise when BNPL usage leads to missed payments on other bills, excessive debt accumulation, or financial stress that affects your broader credit obligations.
Afterpay alternatives
When considering how Afterpay might affect your credit score, you can also look at other BNPL options available in Australia.
Zip (formerly Zip Pay and Zip Money):
Zip offers two products: Zip Pay (up to $1,000 limit) and Zip Money (up to $50,000 limit). Unlike Afterpay, Zip performs credit checks for approvals and charges monthly fees for account maintenance. Zip Money operates more like a traditional line of credit with monthly interest charges.
Humm (formerly Oxipay):
Humm provides small purchases (Little things) up to $2,000 and larger purchases (Big things) up to $30,000. The service performs credit checks for amounts over $2,000 and charges establishment fees for larger purchases, making it more similar to traditional credit products.
Klarna:
A global BNPL provider that entered the Australian market, Klarna operates similarly to Afterpay with no credit check at signup for their Pay in 4 service. However, they may perform soft credit checks for some customers and offer different repayment terms.
CommBank StepPay:
Commonwealth Bank's BNPL offering requires an existing CommBank transaction account and integrates with the bank's digital platform. It offers different spending limits and may have different credit assessment criteria compared to standalone BNPL providers.
Each alternative has different approaches to credit checking, fee structures, and reporting practices, so research thoroughly before choosing a BNPL provider.
Need a personal loan? Meet Credit24
While BNPL services like Afterpay serve some specific needs, sometimes you need more substantial financing with predictable repayment terms. Credit24 offers personal loans from $500 to $10,000 with transparent terms and competitive rates.
Unlike Afterpay, which is designed for specific purchases, Credit24 personal loans provide flexible funding for a wide range of needs including car loans, home improvements, medical expenses, or unexpected costs. Our loans feature fixed repayment schedules with no surprises, helping you budget effectively and build positive credit history through consistent payments.
With over 10 years of experience serving Australian customers, Credit24 offers:
● Quick online applications that take less than 10 minutes to complete
● Fast approval decisions with responses within 24 hours for eligible applicants
● Flexible repayment terms up to 36 months with weekly, fortnightly, or monthly payment options
● No early repayment penalties if you want to pay off your loan sooner
● Transparent fee structure with no hidden costs or surprises
Our personal loans are reported to credit agencies, which means responsible repayment can help build your credit history – something that Afterpay cannot provide. Whether you're funding a major purchase or covering unexpected expenses, Credit24 provides a reliable alternative to multiple BNPL arrangements.
Sources
Buy now pay later statistics 2024 - Finder Australia
How it works - Afterpay Australia
General Terms - Afterpay Australia
Does Afterpay conduct credit checks? - Afterpay Help Centre
Is using Afterpay bad for my credit score? - Afterpay Australia
Afterpay Turns 10: How Aussie Customer Behaviour Has Changed - Afterpay Newsroom
