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If Only Buy Now Pay Later Helped Your Credit Score


They say that necessity is the mother of invention, and the financial hardships brought on by the COVID-19 pandemic and its aftermath have led consumers and businesses to get creative with ways to stay financially solvent.  Buy Now Pay Later (BNPL) services have increased their popularity exponentially over the past several years.  BNPL allows consumers to pay for an item in installments, but they receive the item upon paying the first installment instead of the last, making it akin to layaway in reverse.  Now that most Americans have so little wiggle room in their monthly budgets, and given the rapid rate at which unexpected expenses arise, being able to save up several hundred dollars for a new appliance or luggage set is usually an exercise in frustration, but paying $20 per month for it while using it is much more manageable, and much more appealing.  While consumers have embraced BNPL wholeheartedly, credit reporting bureaus have not.  Paying off BNPL purchases on time does not help your credit score nearly as much as it should.  If you have been keeping up with your BNPL payments but still need to improve your credit score before you can qualify for loans, contact a Plantation credit repair lawyer.

How Credit Bureaus Calculate Your Credit Score

Your credit score is always changing, because you continue to make financial transactions, or fail to make them, as the case may be.  Most transactions on your credit score remain relevant for seven to ten years.  Making payments toward debts improves your credit score, and incurring new debts, missing payments, and filing for bankruptcy protection lowers it.  Likewise, applying for loans but being denied can lower your credit score.  BNPL arrangements, being a fairly new financial product, do not have much effect on your credit score at all.  Paying off a BNPL purchase for $300 does not give your credit score the same boost that paying off the balance of a credit card with a $300 credit limit would.

BNPL Doesn’t Help Your Credit Score Much, but Perhaps It Should

Penny Lee of The Hill argues that credit reporting bureaus place too much emphasis on revolving loans like credit card accounts and too little on BNPL agreements.  This is significant because BNPL is accessible to consumers with a modest income, who are unable to qualify for credit cards, or who have credit cards with a low balance, which they have long since maxed out.  Likewise, the fees on BNPL are much lower than on credit cards, and BNPL involves little to no interest charge.  Lee argues that changing credit reporting methods to reward consumers for responsible use of BNPL would make conventional forms of credit accessible to a much wider range of consumers.

Contact a South Florida Debt Lawyer About Boosting Your Credit Score

A South Florida debt lawyer can help you improve your credit score, even if you can currently only afford BNPL purchases with low monthly payments.  Contact Nowack & Olson, PLLC in Plantation, Florida to discuss your case.



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