That’s Why We Do It!: No Credit Check Buy Now Pay Later Explained

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Before approving your account, some Buy Now Pay Later lenders don’t always conduct a credit check. But would this be beneficial for you, and could it affect your credit score?

The modern lay-buy equivalent is Buy Now Pay Later, or BNPL. With this system, you can take your purchases home with you on the day of purchase and pay for them later in instalments.

These services are accessible through an app or in-store. You usually must pay back your purchase via four equal payments over the next six to eight weeks.

The amount you owe is taken from the credit card you have on file with your BNPL account, so make sure there’s enough money to cover the charges.

This finance style was popular among Australians long before the pandemic began, but it took off in 2020, with many people experiencing economic hardship and unemployment.

The number of people using buy now, pay later services in Australia reached close to 6 million between July and September 2021. These users were responsible for over $11 billion in transactions in the 2021 fiscal year.

Although they were initially apprehensive, more conventional financial service providers, such as banks, have been venturing into the buy-now-pay-later (BNPL) market. Some leading companies in this industry are Afterpay, Zip Pay, Openpay, Splitit Fupay, Humm and Laybuy. Meanwhile, some notable bank players include CommBank StepPay and NAB Now Pay Later.

According to payments solution provider Marqeta, worryingly, nearly two in three Australian users of BNPL say they have increased their usage over the past year, while 45% admit to using it as a financial lifeline.

“It’s a ‘buy now, pay later world. And its consumers who are driving this payment revolution,” Marqeta CEO Jason Gardner said in an official statement.

As with any form of credit, using buy now, pay later can affect your credit score. However, depending on the provider you use, and how diligent you are in repaying your purchases, it may not negatively affect your creditworthiness.

“There are definite benefits to using this type of financing, especially during economic uncertainty. But it’s important to be aware that it can affect your credit score in the long term,” says financial expert Christine Hueber of My Money Success.

So why do people opt for BNPL? Well, for one thing, it offers flexibility. Users don’t have to go through a lengthy application process or deal with credit checks and waiting time.

There’s also the fact that this type of financing is designed to be more affordable than traditional forms of credit, such as store-issued lines of credit and bank loans. BNPL providers often offer low or interest-free introductory periods and discounts on purchases, so users can get the items they need without breaking the bank.

Whether or not BNPL positively or negatively impacts your credit score depends on how you use it. If you’re responsible for your repayment practices and make sure to keep track of your spending, you should be able to maintain a good credit score.

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