You are here: Home - Credit Cards & Loans - News -

Buy now pay later schemes damaging credit scores

Written by:
More than two million UK adults have damaged their credit score by opting to delay payment on purchases, research reveals.

Buy now pay later (BNPL) schemes are offered by retailers and allow shoppers to spread the cost of a purchase.

One in five people used a BNPL scheme in the last 12 months, according to a study by ComparetheMarket – the equivalent of 10 million people across the UK.

However, a missed BNPL payment appears as a black mark on your credit report, potentially damaging your credit score – something two-fifths of people surveyed didn’t know.

Missed payments are visible to lenders on credit reports for six years and can scupper your chances of getting a mortgage, credit card or loan.

BNPL schemes appear to encourage borrowing, with two-fifths of shoppers admitting they spend more than they usually would without the scheme and more than half feeling a BNPL scheme had contributed to their increased levels of personal debt.

Young people seem particularly dependent on these schemes, with nearly a third of 25-34-year-olds using one during the past year. More than a third (39%) said using one had damaged their credit score.

John Crossley, head of money at ComparetheMarket, said: “The allure of buy now pay later is clear but these statistics show that such schemes are encouraging people into taking on more debt than perhaps they realise.

“Failure to pay outstanding bills can damage your credit score and result in a spiral of outstanding payments which could jeopardize important life milestones like buying a house. It is concerning that many of these schemes appear to be targeted at younger demographics.

“If you need to take on credit for essential purchases, there are cheaper and less risky alternatives available. Many credit cards offer 0% interest on new purchases, often for up to two years. It’s also worth checking your eligibility for credit by using a soft eligibility checker which won’t damage your credit score.”

According to the research, 35% of people would use a BNPL while 15% would opt for a credit card. One in ten said they chose a BNPL because they had reached their existing credit card limit.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Everything you wanted to know about ISAs…but were afraid to ask

The new tax year is less than a fortnight away and for ISA savers or investors, it’s hugely important. If yo...

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week