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Buy now pay later no credit check loans are increasing in popularity. You’ve probably seen it on your favorite retailers’ websites. When you checkout there’s the option to buy now and pay later, allowing you to pay in four equal installments and usually for no interest or fees and with no hard credit check.
If you have no credit or bad credit, these can seem like a great option—but only if you know how they work, and which companies are the best options for those in search of no-credit-check online financing.
In This Post:
- Buy Now Pay Later no credit check: How does it work?
- What is a Buy Now Pay Later loan?
- Do Buy Now Pay Later companies check your credit?
- What is a soft credit check?
- Does using Buy Now Pay Later hurt impact my credit score?
- Soft credit check status of the top BNPL sites
- What if you miss payments?
- Final Thoughts
Buy Now Pay Later no credit check: How does it work?
It sounds almost too good to be true, right? How can you buy now and pay later? What’s the catch?
There’s no catch.
Plus, many Buy Now Pay Later (BNPL) loans don’t affect your credit. Many companies that offer BNPL like Affirm and Afterpay only do a soft credit check which doesn’t hurt your credit (very important for those with bad credit). But if you don’t make your payments on time, it could hurt your credit.
Here we’ll explore the questions, ‘what is a soft credit’ check and how do BNPL loans work?
What is a Buy Now Pay Later loan?
Buy Now Pay Later programs offer short-term financing, allowing you to take the purchase now and pay for it over time. Most programs ask for a down payment equal to 25% of the purchase price. You then make equal payments over the next couple of months. Some companies require weekly, bi-weekly, or monthly payments. Always read the fine print and choose the loan that works best for you.
Most BNPL loans are interest-free if you make your payments on time and the terms vary by company. Some companies charge interest if you choose longer repayment periods. For example, you may not pay interest on a 4-installment loan to be paid off 3 months, but you’d pay interest on a purchase stretched out over 12 months.
Do Buy Now Pay Later companies check your credit?
Many BNPL companies don’t check your credit or if they do it’s a soft credit check. That’s why they have the name Buy Now Pay Later No Credit Check loans.
Why would companies take the chance?
There’s one reason – they are short-term loans. By short-term, it could be a few weeks, but at the most a couple of months. This differs from credit cards which you can take as long as you want to pay back, as long as you make the minimum payment. It’s also different than installment loans that stretch your payments out over a few years but have a principal and interest payment requirement.
Another major difference is interest. Most BNPL loans don’t charge interest if you make your payments as agreed. In this manner, using a buy now pay later service will not hurt your credit or cause you to have bad credit as long as you pay your balance on time. Credit cards charge interest if you don’t pay your balance in full within the grace period and installment loans always charge interest.
But, BNPL companies often do a soft credit check while credit card companies and banks do hard credit checks.
What is a soft credit check?
According to Experian, a soft inquiry or soft credit check is when a company checks your credit score without the intent to obtain new credit. When you get pre-approved for a loan, for example, you aren’t committing to the loan, so most banks do a soft credit check until you choose the loan and move forward with the application, then they do a hard inquiry.
Other examples of soft inquiries are when you check your own credit score using a service like Credit Karma, or when you apply for a Buy Now Pay Later loan.
Now you know the answer to ‘what is a soft credit check’ but do soft inquiries hurt your credit score?
Does a soft credit check impact my credit score?
Soft inquiries do not affect your credit score because it’s not a formal credit application. Hard inquiries are a formal credit application. When a lender does a hard inquiry it’s because they want to see your payment history, amount of outstanding debt, and how well you can afford the loan you’re applying for.
Most soft inquiries don’t show up on your credit report. Hard inquiries, however, stay on your credit report for 2 years. They may lower your credit score for a while too – usually one inquiry is worth 5 points, but if you have a lot of them within a short period, it can bring your credit score down significantly.
Does using Buy Now Pay Later hurt impact my credit score?
A Buy Now Pay Later No Credit check loan doesn’t hurt your credit score. Most companies only do a soft credit check, but always check with the provider first. If they only do a soft credit pull, it doesn’t affect your credit score.
But, that’s not the only way a loan can affect your credit score.
If the financing company reports to the credit bureaus, your payment history and use of the credit will affect your credit score too.
Some BNPL companies like Sezzle report your payments to the credit bureau if you upgrade to Sezzle Plus. This can be good or bad, depending on how you handle your debt.
If you make your payments on time – it’s good. You’ll get a positive payment history and your payment history is 35% of your credit score (the largest portion). But, if you miss a payment, they’ll report the negative payment history which can bring your credit score down and can lead to bad credit.
If you’re looking for a way to build your credit, work with a company that reports to the credit bureaus.
Soft credit check status of the top BNPL sites
|BNPL Firm||Type of Credit Check||Do they report to Credit Agencies (any fine print?)|
|None||No, Afterpay doesn’t believe in damaging your credit score if you miss a payment. They will pause your account if you fall behind, though.|
|Soft credit check||Standard Sezzle accounts aren’t reported to the credit bureaus, but you can upgrade to Sezzle Plus, which reports to the credit bureaus. You can use this to build your credit history. Users are eligible after paying off one order on time or early. You must opt-in to get Sezzle Plus.|
|Soft credit check (with most retailers)||Affirm reports to Experian unless you have a 3-month no-interest loan or a 4-month bi-weekly payment loan with 0% interest.
No matter your loan options, though, if you miss a payment, Affirm reports the negative payment history to Experian.
|Soft credit check in most cases (depends on the payment plan chosen)||Most plans don’t report to the credit bureau, but if you miss a payment, it will likely affect your credit score. If you miss a payment for so long that it goes to collections, it could hurt your credit score even further.|
|Soft credit check||If you miss a payment, it will hurt your credit score because Zip will report the negative payment history. If your account goes to collections, it could hurt your credit score further.|
|None||No, but you can activate credit building to have the account reported to the credit bureaus after you make four months of on-time payments.|
What if you miss payments?
This is important enough to repeat, especially for those with already existing bad or no credit.
Even if a service says they don’t report to the credit bureaus, they will likely report missed payments. When they say they don’t report to the credit bureaus it means they don’t report all payments to the credit bureau, which is important if you’re trying to build credit or recover from bad credit.
If you miss payments, most services report it to the credit bureau. Because your payment history makes up the largest portion of your credit score, it could damage your credit score.
To make matters worse, if you miss your payments long enough that the service sends it to collections, the collection agency could report the collection to the credit bureaus. This hurts your credit score even further because collections mean you defaulted on the debt for 90 – 180 days.
Collections stay on your credit report for 7 years. They may not hurt your credit score for that long, but they are a tradeline on it, showing future lenders that you don’t pay your bills on time. This could complicate things, so don’t use a BNPL loan unless you can afford to pay it.
We love the chance to buy now pay later with no credit check, especially when we know we can afford the payments, but just don’t have the money upfront to cover the full cost of a large purchase. If you have bad credit or no credit, however, be sure that you can afford each credit or the service will report your payment status to the credit agencies.
It’s always smart to read the fine print and know what the company requires. Find out if they do a hard credit inquiry. If they do, think about your future plans. Do you intend to apply for another loan soon? If so, avoiding hard inquiries in the months leading up to it is important. If you don’t have plans for immediate credit applications, a credit inquiry won’t hurt you, but you should know it’s there nonetheless.
Kim is a personal finance expert with a Bachelor’s degree in Finance from the University of Illinois at Chicago. Kim enjoys helping people take charge of their personal finances and has been doing so with her freelance writing for 15 years. She loves helping people break down difficult personal finance topics, helping them make smart financial decisions that make them feel empowered.