Credit Score - Experian

The credit card industry recently pounced on new rules that allow Buy Now Pay Later (BNPL) providers to report activity to credit reporting agencies. This is a continuation of the myth that simply having a BNPL account could mean young people won’t be able to get a loan.

But what the payments industry dinosaurs neglect to mention is that credit cards – and even internet connections, mobile phone plans and electricity accounts – pose a greater risk to credit history than some BNPL accounts like an Afterpay account.

An article in the Australian recently declared that “Australians who buy items such as a handbag or sporting equipment through a buy now pay later service such as Afterpay and Zip could have their purchases recorded on their credit history and visible to credit providers.”

While it’s true that the data standards for credit reporting have been updated to allow for BNPL products to be identified, there’s nothing in place to require BNPL companies to report defaults.

But Afterpay – which accounts for 75% of BNPL transactions – doesn’t even participate in the credit reporting system, so there’s no chance an Afterpay account could affect a credit score.

SmartWayToPay is today highlighting the far more common everyday services that are more likely to affect one’s credit rating. 

The government’s MoneySmart website highlights that defaults on utilities like Internet, phone, and energy accounts all count against credit files. Utilities providers will report a default if;

  • the amount owed is $150 or more, and
  • your service provider can’t contact you (called a clearout), or
  • 60 days or more have passed since the due date, and the service provider has asked you to pay the debt either by phone or in writing

A default on a credit file from not paying a utility bill seems minor but could seriously hamper people’s ability to get a loan in the future.

SmartWayToPay spokesman David Liston today commented on the distorted coverage of BNPL’s effect on loan applications. 

“For those who fear a BNPL account will hold them back from getting a loan, I would like to highlight that banks look at all your transactions when applying for a credit product anyway. 

“They’ll see transactions made using Afterpay, Deliveroo, your local pub, your rent payments, your holiday bookings. A bank will always review your money management history.

“When it comes to Afterpay in particular, they’ll never report you to credit agencies, meaning Afterpay can’t impact your credit score. The same can’t be said for credit card providers.”

SmartWayToPay is a new website created to help Australians save money when paying for things. It receives fees from some low-rate and zero-rate Buy Now Pay Later schemes. 

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