Does Afterpay Increase Credit Score? The Truth About Buy Now, Pay Later and Your Credit History

For most users in the United States, the answer to does Afterpay increase credit score is currently no. Afterpay’s primary service, known as "Pay-in-4," allows you to split purchases into four bi-weekly installments. The company explicitly states that they do not report these domestic payments to the major credit bureaus (Equifax, Experian, and TransUnion).

Because your on-time payments never reach your credit file, they cannot calculate into your FICO score. You could successfully pay off thousands of dollars in merchandise over several years without generating a single positive data point on your credit report. This makes the standard service a "credit neutral" tool—it neither helps nor hurts your score when used responsibly.

However, this lack of reporting is a double-edged sword. While it protects your score from dropping due to a "hard inquiry" when you apply, it also means you miss out on the benefits of building a positive payment history. This is a critical distinction for consumers specifically looking to build their financial profile.

Key Takeaways

• The Short Answer: For the standard "Pay-in-4" service, Afterpay does not increase your credit score because payment history is not reported to credit bureaus.
• The Exception: The "Pay Monthly" option is a traditional installment loan issued by First Electronic Bank. These long-term loans are typically reported and can impact your score.
• Hidden Risks: While on-time payments won't help you, defaulting can hurt you. Unpaid debts may be sold to collections agencies, which can report the negative mark to bureaus.
• No Hard Inquiries: Applying for the standard service usually triggers a soft credit check, which does not lower your credit score.
• Future Changes: New scoring models like FICO 10T are being developed to include Buy Now, Pay Later data, but widespread adoption by lenders has not yet occurred.

The "Pay Monthly" Exception: When Afterpay Does Build Credit

It is vital to distinguish between the standard Pay-in-4 app feature and the monthly financing options. When purchasing higher-ticket items, you may be offered a "Pay Monthly" plan. These are interest-bearing loans ranging from 6 to 24 months, underwritten by First Electronic Bank.

Unlike the short-term product, these installment loans operate like traditional personal loans. First Electronic Bank typically reports these accounts to the credit bureaus. Consequently, paying these monthly installments on time can increase your credit score by adding positive history and diversifying your credit mix. Conversely, missing these payments will damage your score just like missing a credit card payment.

The Hidden Danger: Collections and Negative Reporting

While Afterpay keeps your positive habits private, your financial missteps may become public. If you default on a loan, Afterpay generally pauses your account and charges late fees. However, if the debt remains unpaid for an extended period, they may sell the debt to a third-party collections agency, such as InDebted.

Once a debt is transferred to a collection agency, the rules change. Collection agencies have the authority to report the delinquent account to the credit bureaus. A collection account is a major derogatory mark that can drop a credit score by significant points and remain on your credit report for up to seven years.

This creates a scenario of asymmetric risk: you get zero credit for success, but you face full liability for failure. Consumers must be vigilant, as believing the loan is "invisible" can lead to a false sense of security that results in long-term credit damage.

Comparison: Afterpay vs. Credit Building Tools

To understand where Afterpay fits in your financial toolkit, it helps to compare it with products designed specifically to improve credit.

Why Most BNPL Apps Don't Report Yet

You might wonder why companies like Afterpay don't report your payments to help you out. The reason is largely technical. Traditional credit scoring models, such as FICO 8, were designed for monthly payments, not bi-weekly ones.

• Average Age of Accounts: Opening a new "loan" for every pair of sneakers you buy would drastically lower the "average age" of your credit accounts, potentially hurting your score.
• Utilization Spikes: High turnover of small loans can look like financial instability to older algorithms.
• Regulatory Changes: The(https://www.consumerfinance.gov/about-us/newsroom/cfpb-study-finds-buy-now-pay-later-borrowers-more-likely-to-be-highly-indebted/) and the credit bureaus are working on new formats to include this data safely. Until widely adopted, Afterpay protects users by not reporting standard loans.

Strategic Advice for Consumers

If your primary goal is to increase your credit score, relying on Afterpay is not the most effective strategy.

• Use Secured Cards: For establishing credit, a secured credit card is superior. It reports to all three bureaus and builds a permanent trade line.
• Clean Up Bank Statements: Even if Afterpay isn't on your credit report, mortgage lenders often review bank statements. Recurring BNPL payments can be flagged as "phantom debt," affecting your debt-to-income ratio during manual underwriting.
• Monitor Your Report: Regularly check your credit file at(https://www.annualcreditreport.com/index.action) to ensure no unexpected collection accounts have appeared from old BNPL transactions.

Using Buy Now, Pay Later services can be a convenient way to manage cash flow for retail purchases without interest. However, treat them as a budgeting tool rather than a credit-building strategy. To see your score rise, stick to traditional credit products that guarantee your good behavior gets the recognition it deserves.

Frequently Asked Questions