You’ve been using BNPL all wrong – five common mistakes could stop you getting a credit card or mortgage in the future


Buy now Pay later is an increasingly popular way to shop – but if you don’t use it properly, it could hurt you in the future.

Some buyers using Buy Now, Pay Later (BNPL) services, such as Klarna, are now logging transactions on their credit reports.


People’s use of Klarna is now reported to credit agenciescredit: Getty Images – Getty

This means that for the first time, other lenders can see this type of lending in their records.

and that could affect your ability to get mortgage Or in some cases credit cards.

After a setback to the BNPL industry, A. declared by No. of Credit Reference Agencies Earlier this year, Klarna Started reporting buyers’ use of its services Two of the three major credit reference agencies – TransUnion and Experian – from June 1.

Credit reference agencies put together information about how well you manage credit and make your payments.

This is something that lenders keep in mind while offering credit.

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Remember, BNPL deals are like any other loan: you have to repay it on time or else you will be charged interest or penalty.

It’s really important to read the small print when you decide to buy something on BNPL so you know exactly what you’re going to pay, and when.

So what can you do to ensure that BNPL is not affecting your ability to use the funds to borrow?

Finally, lenders want to know that you are responsible for your cash, said Sabya Mukherjee, head of credit risk. monies,

Here are five possible problems that can happen if you use BNPL.

maximizing your credit

“A few months back, the use of BNPL by people was invisible to any mortgage provider. But now, lenders can look at it when they are assessing how much you can borrow,” Sabya said.

With any type of credit, you are given the maximum amount you can borrow – but you should try not to max out.

Sabya suggests using BNPL only when you need it – borrowing the maximum amount can affect how much you can borrow elsewhere.

Also, if you forget to mention any BNPL transactions on your mortgage application, a mortgage lender may assume that you are not declaring an ongoing financial commitment, even if you pay off the balance very soon. intend to do.

Hence it is important to use BNPL wisely.

not paying your balance on time

If you are not able keep up with your repaymentLenders are more likely to think that you will default on other loans as well.

Sabya said: “If I am applying for a credit card but have missed Two installments on my purchase now pay later productThis will not give the credit provider enough confidence that I will stick with the credit card repayments.”

Missing payments can indicate that you are struggling with your finances.

But sticking with them shows a degree of financial responsibility, which will give lenders more assurance that you can make more serious repayments, such as a mortgage.

How to cut the cost of your debt

This can be really worrying if you are in a large amount of debt. Here are some suggestions from Citizen Advice on how you can take action.

Check your bank balance regularly – Knowing how to spend is the first step to managing your money

Prepare your budget By writing down your income and removing your essential bills like food and transportation
If you have money left over, plan in advance what else you will spend or save. If you don’t, look at ways to cut your costs.

Pay more than the minimum – If you have credit card debt, you may want to pay more than the minimum amount on your credit card each month to reduce your bill faster.

Pay off your most expensive credit card quickly – If you have more than one credit card and can’t pay them off in full each month, go for the most expensive card (the one with the highest interest rate).

Prioritize your loans – If you have multiple debts and you can’t pay them all, it’s important to prioritize them

Your rent, mortgage, council tax and energy bills should be paid first as the consequences could be more dire if you do not pay

seek advice – If you are struggling to pay off your debts month after month, it is important that you seek advice as soon as possible before they escalate

Groups like Citizens Advice and National Dateline can help you prioritize and negotiate with your creditors to offer you more affordable repayment plans.

don’t lose your balance

Even if you are not paying your BNPL balance in full, paying at least some amount in regular installments will help show lenders that you can manage your debt.

Sabya admitted, “It is not going to be easy in the current environment.”

“But having a regular budget, where you’re trying to spend less than you earn, is a good place to start.”

If you have an outstanding BNPL loan, try to keep a little different every month to top it.

If you’re having trouble meeting your needs, contact your creditors or meet with a certified credit counselor to discuss your options.

It won’t rebuild your credit score immediately, but if you can start managing your credit and make payments on time, your score should increase over time.

Organizations like StepChange and Citizens Advice may also be able to offer some help or advice.

Applying for Multiple BNPL Accounts

You may think that opening and paying off multiple BNPL accounts will improve your credit score and prove that you can manage debt.

But that is not necessarily the case, Sabya said.

“The fact that you can manage to repay is more important than how much credit you have,” he explained.

Lenders are intimidated by people who have too many different types of loans, and this can prevent them from giving you loans.

Another no-no is applying for too many different credit accounts, for example, within a few days or weeks, lenders may find you desperate for cash.

using aliases

It may sound obvious, but it’s important to have the right name on your account.

Sabya said, “Sometimes we see instances where someone hasn’t updated their name, if they got married and changed it, or they use a shortened version of their name for some providers. “

It’s possible that you have two or more names on your credit file, which can be enough for lenders to refuse you on the basis that they think you are Danger!,

This of course isn’t just a problem for BNPL – you may have applied for a credit card by a different name before – but it’s worth checking that your credit score details are consistent.

“The first thing to do is check your credit report to see what information they put on you,” Sabya advises.

You can do this for free through sites like Credit Karma or ClearScore.

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Sabya said, “If you want to change a name, you have to send proof of the name you want, and why you want to change it, but it is very straightforward.”

“If it’s only one provided, such as Klarna, it’s usually not a huge problem to fix.”

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