What is Buy Now, Pay Later and Does it Affect Your Credit Score?

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Buy now, pay later is an old concept that’s seen a resurgence in popularity in the past few years.

In essence, BNPL is a type of installment loan that you can use to make a large purchase: The cost of your purchase is broken into multiple payments of equal amounts, with the first payment typically due upon checkout.

Here’s how buy-now, pay-later financing works, how it affects your credit score, and its potential pitfalls:

What is buy now, pay later?

Though buy-now, pay-later financing may seem like a new phenomenon, it’s been around since the 19th century. Our grandparents and great grandparents may have used BNPL, also known as point-of-sale financing, to purchase large goods like appliances or furniture.

This type of financing grew less popular as credit cards became more common, but has seen a recent comeback among online retailers — especially during the COVID-19 pandemic, when consumers weren’t visiting brick-and-mortar stores.

While BNPL is most common with online purchases, some retailers also offer this kind of financing in-store. Several mobile apps also allow you to use a BNPL kind of loan to pay for purchases, even if the retailer itself doesn’t officially offer BNPL.

Learn more: How to Get a Personal Loan

How does buy now, pay later work?

When you’re shopping online and get to the checkout page, you’ll typically see a box offering buy now, pay later if the retailer offers this financing option. The retailer may offer BNPL financing directly or through a third party, such as Affirm, Afterpay, or Klarna.

If you opt for the BNPL payment option, you’ll be asked to fill out an application on the checkout page. You’ll need to provide certain information, like your address, date of birth, phone number, and the payment method you’ll use to pay each of the installments.

Good to know: While a BNPL application is technically a loan application, BNPL lenders generally only require a soft credit check, which won’t hurt your credit score.

The typical BNPL repayment model allows you to pay in four installments, with each installment paid every two weeks so that you’ve completely paid off your purchase in six weeks. But the specific installment period varies depending on the BNPL provider.

In many cases, you won’t pay interest if you make your BNPL payments on time, as agreed. But some BNPL companies do charge interest, which can be high in some cases. It’s important to read the fine print to check for hidden fees and interest charges before you sign up for this type of financing.

Here’s an example of how buy-now, pay-later financing can work:

  • You purchase a new laptop for $780 (with tax) using BNPL.
  • You’ll pay $195 (¼ of $780) when you check out.
  • You’ll pay a second installment of $195 two weeks later.
  • The third installment of $195 will be due four weeks after your purchase.
  • The fourth and final installment of $195 will be due six weeks after your initial payment.

Does buy now, pay later affect your credit score?

Most BNPL lenders don’t report your on-time payments to the credit bureaus, so using this type of financing typically won’t affect your credit one way or the other.

But if you miss one or more BNPL payments, the lender might report your late payment to the credit bureaus, which could end up on your credit report and hurt your credit score.

Read more: Bad Credit Loans

Ways to build credit

If you’re considering BNPL because you’re having trouble getting approved for other types of financing, improving your credit might help you qualify for a credit card or personal loan.

Here are some tried-and-true ways to bolster your credit:

  • Pay your bills on time. Payment history makes up a significant portion of your credit score, so paying all your bills on time is one of the best ways to raise your score.
  • Reduce your credit utilization ratio. Your credit score is also partially based on how much available credit you have compared to how much credit you’re using. For example, if you have $5,000 in available credit and have a current debt of $2,500, your credit utilization ratio is 50%. Aim for a credit utilization of 30% or less, which you can achieve by either paying down your balances or requesting a credit limit increase.
  • Get a secured credit card. This kind of credit card requires an upfront security deposit. The deposit helps reassure the lender that you won’t default on your payments.The lender will report your payments to the credit bureaus, so making your secured credit card payments on time can help you improve your credit and eventually upgrade to a traditional credit card.
  • Take out a credit-builder loan. A credit-builder loan, which is specifically designed to help those with poor credit, is generally for a small amount of money and offers a short repayment period of six months to two years.

While you can’t use Credible to find a credit-builder loan, you can compare interest rates from our partners who offer loans for small amounts. The Credible partner lenders in the table below all offer personal loans for $5,000 or less.

Lender Fixed rates Min. loan amount

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
9.95% – 35.99% APR $2,000**
  • Fixed APR: 9.95% – 35.99% APR
  • Variable APR: N/A
  • Min. credit score: 550
  • Loan amount: $2,000 to $35,000**
  • Loan terms (years): 2, 3, 4, 5*
  • Time to fund: As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except CO, IA, HI, VT, NV NY, WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Loan servicer: Avant
  • Loan Uses: Debt consolidation, emergency expense, life event, home improvement, and other purposes
  • Min. Income: $1,200 monthly

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.99% – 35.99% APR $5,000
  • Fixed APR: 4.99% – 35.99% APR
  • Variable APR: N/A
  • Min. credit score: 600
  • Loan amount: $2,000 to $50,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as 1 – 3 business days after successful verification
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except DC, IA, VT, and WV
  • Customer service: Phone
  • Soft credit check: Yes
  • Loan servicer: Best Egg and Blue Ridge Bank
  • Min. Income: None
  • Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
5.99% – 24.99% APR $2,500
  • Fixed APR: 5.99% – 24.99% APR
  • Min. credit score: 660
  • Loan amount: $2,500 to $35,000
  • Loan terms (years): 3, 4, 5, 6, 7
  • Time to fund: As soon as the next business day after acceptance
  • Fees: Late fee
  • Discounts: None
  • Eligibility:  Available in all 50 states
  • Customer service: Phone
  • Soft credit check: Yes
  • Loan Uses: Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
7.04% – 35.89% APR $1,000
  • Fixed APR: 7.04% – 35.89% APR
  • Min. credit score: 600
  • Loan amount: $1,000 to $40,000
  • Loan terms (years): 3, 5
  • Time to fund: Usually takes about 2 days
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Loan servicer: LendingClub Bank
  • Min. Income: None
  • Loan Uses: Debt consolidation, paying off credit cards, home improvement, pool loans, vacations, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
7.99% – 35.99% APR $2,000
  • Fixed APR: 7.99% – 35.99% APR
  • Min. credit score: 580
  • Loan amount: $2,000 to $36,500
  • Loan terms (years): 2, 3, 4
  • Time to fund: As soon as the next business day
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except NV and WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: $20,000
  • Loan Uses: Home improvement, consolidate debt, credit card refinancing, relocate, make a large purchase, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
3.49% – 19.99% APR $5,000
  • Fixed APR: 3.49% – 19.99% APR
  • Min. credit score: 660
  • Loan amount: $5,000 to $100,000
  • Loan terms (years): 2, 3, 4, 5, 6, 7*
  • Time to fund: As soon as the same business day
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available in all states except RI and VT
  • Customer service: Phone, email
  • Soft credit check: No
  • Loan servicer: LightStream
  • Min. Income: Does not disclose
  • Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
18.0% – 35.99% APR $1,500
  • Fixed APR: 18.0% – 35.99% APR
  • Min. credit score: None
  • Loan amount: $1,500 to $20,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as the same day, but usually requires a visit to a branch office
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Must have photo I.D. issued by U.S. federal, state or local government
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: Does not disclose

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
5.99% – 24.99% APR $5,000
  • Fixed APR: 5.99% – 24.99% APR
  • Min. credit score: 600
  • Loan amount: $5,000 to $40,000
  • Loan terms (years): 2, 3, 4, 5
  • Time to fund: As soon as 2 – 5 business days after verification
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except MA, NV, and OH
  • Customer service: Phone, email, chat
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation and credit card consolidation only

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.99% – 17.99% APR $600
(depending on loan term)
  • Fixed APR: 4.99% – 17.99% APR
  • Min. credit score: 660
  • Loan amount: $600 to $50,000*
  • Loan terms (years): 1, 2, 3, 4, 5
  • Time to fund: 2 to 4 business days after verification
  • Fees: None
  • Discounts: None
  • Eligibility: Does not disclose
  • Customer service: Phone, email
  • Soft credit check: No
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, home improvement, transportation, medical, dental, life events

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
7.95% – 35.99% APR $2,000
  • Fixed APR: 7.95% – 35.99% APR
  • Min. credit score: 640
  • Loan amount: $2,000 to $40,000
  • Loan terms (years): 3, 5
  • Time to fund: As soon as one business day
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all states except IA, ND, WV
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: None
  • Loan Uses: Debt consolidation, home improvement, vehicles, small business, new baby expenses, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
6.99% – 21.78% APR10 $5,000
  • Fixed APR: 6.99% – 21.78% APR10
  • Min. credit score: Does not disclose
  • Loan amount: $5,000 to $100,000
  • Loan terms (years): 2, 3, 4, 5, 6, 7
  • Time to fund: 3 business days
  • Fees: None
  • Discounts: Autopay
  • Eligibility: Available in all states except MS
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Solely for personal, family, or household uses

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
8.93% – 35.93% APR7 $1,000
  • Fixed APR: 8.93% – 35.93% APR7
  • Min. credit score: 560
  • Loan amount: $1,000 to $50,000
  • Loan terms: 3 to 5 years 8
  • Time to fund: Within one day, once approved9
  • Loan types: Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: A U.S. citizen or permanent resident; not available in DC, SC, WV
  • Customer service: Phone, email
  • Soft credit check: Yes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
5.94% – 35.97% APR $1,000
  • Fixed APR: 5.94% – 35.97% APR
  • Min. credit score: 560
  • Loan amount: $1,000 to $50,000*
  • Loan terms (years): 2, 3, 5, 6
  • Time to fund: Within a day of clearing necessary verifications
  • Fees: Origination fee
  • Discounts: Autopay
  • Eligibility: Available in all states except West Virginia
  • Customer service: Email
  • Soft credit check: Yes
  • Min. Income: Does not disclose
  • Loan Uses: Debt consolidation, credit card refinancing, home improvement, and other purposes

Credible Rating

Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.
4.37% – 35.99% APR4 $1,000
  • Fixed APR: 4.37% – 35.99% APR4
  • Min. credit score: 580
  • Loan amount: $1,000 to $50,0005
  • Loan terms (years): 3 to 5 years4
  • Time to fund: As fast as 1 business day6
  • Fees: Origination fee
  • Discounts: None
  • Eligibility: Available in all 50 states
  • Customer service: Phone, email
  • Soft credit check: Yes
  • Min. Income: $12,000
  • Loan Uses: Payoff credit cards, consolidate debt, take a course or bootcamp, relocate, make a large purchase, and other purposes
Compare rates from these lenders without affecting your credit score. 100% free!Get Rates Now
All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | 10SoFi Disclosures | Read more about Rates and Terms

Is buy now, pay later right for you?

The best-case scenario for making a major purchase is to pay for it in full when you’re ready to buy. Saving up for a big expense in advance means you don’t have to worry about going into debt to buy the item you want, or keeping track of monthly payments.

But if you can’t wait to make a big purchase and don’t have the money set aside for it, BNPL could be an option. BNPL allows you to finance a purchase, often without interest, and you’ll have a clear, short-term repayment schedule. BNPL may also be the only financing option if you don’t have good credit or access to a credit card.

Like any financial product, BNPL financing has pros and cons to consider:

BNPL pros BNPL cons
Zero-interest plans available Some plans may charge late fees
No minimum credit score required Payments may not be reported to the credit bureaus, so making on-time payments won’t help you build credit
Offered at many retailers during checkout Late payments may be reported to the credit bureaus, which can hurt your credit
Lets you split a large purchase into smaller, more manageable payments Easy to overspend

Buy now, pay later alternatives

If you want to split up payments for a large purchase without using BNPL financing, here are some alternatives to consider.

Personal loans

Applying for a personal loan is one way to help you afford a larger purchase or unexpected expense. A variety of financial institutions offer these installment loans, such as banks, credit unions, and online lenders. You’ll pay interest on a personal loan, which is the cost of borrowing money (expressed as the annual percentage rate). This means you’ll pay the lender back more money than you borrowed.

Most personal loans are unsecured, which means you’ll need to have good to excellent credit to qualify for the best loan terms and lowest interest rates. Several lenders specialize in offering personal loans to borrowers with bad credit, but you’ll most likely pay a higher interest rate to borrow money.

Another plus: Many personal loan lenders report your on-time payments to the credit bureaus. So, unlike BNPL loans, making your personal loan payments on time can help you build your credit.

You can use our personal loan calculator to see how much your monthly payments might be.

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Credit cards

The rise of credit cards in the 20th century is a big reason why buy-now, pay-later financing options fell in popularity. With a credit card, you can make a purchase even if you haven’t saved for the full cost of the item.

If you pay the balance in full as soon as the bill arrives, you can avoid paying interest on the purchase.

Home equity loans

Home equity loans allow homeowners to borrow against the equity they’ve built up in their homes. These loans often come with a lower interest rate than personal loans or credit cards, and there are generally no restrictions on how you can use the money.

But home equity loans come with closing costs and fees. And since you use your home as collateral to secure the loan, the lender could foreclose on your home if you aren’t able to make your payments.

About the author
Emily Guy Birken
Emily Guy Birken

Emily Guy Birken is a Credible authority on student loans and personal finance. Her work has been featured by Forbes, Kiplinger’s, Huffington Post, MSN Money, and The Washington Post online.

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