Does Afterpay and Buy Now Pay Later affect your credit score?

Buy Now Pay Later (BNPL) services in Australia like Afterpay, Klarna, Zip and PayPal Pay in 4 offer interest‑free instalments, but they can affect your credit score and loan approval, particularly if payments are missed, multiple BNPL accounts are used, or BNPL is relied on alongside other debt.

In this article, we’ll get you up-to-date on all the latest legislation changes and explain how BNPL affects your credit score, credit file and overall financial profile, when credit checks happen, what missed payments and late fees mean, and how BNPL can impact home loans, car loans and other credit products.

More than one in three Australian credit card holders don’t pay off their credit card balance each month, relying on credit to make ends meet. That’s around 11% of the adult population.

Roy Morgan, Nov 2025.

Buy Now Pay Later allows you to access goods or services immediately and repay the cost through a payment plan made up of interest‑free instalments or an interest‑free period.

Once mainly used for retail purchases, BNPL is now common for subscription services, everyday expenses and short‑term loans, increasing overall credit exposure for many Australians.

Under the National Credit Act and consumer credit laws, BNPL providers must:

• Hold an Australian Credit Licence
• Follow responsible lending guidelines and responsible lending criteria
• Meet consumer protections overseen by the Australian Securities and Investments Commission
• Comply with credit reporting systems and credit reporting laws.

This reflects how BNPL fits into the modern credit market and digital finance landscape.

BNPL services split your purchase into scheduled repayments that are automatically deducted from your debit card or bank account.

• You choose BNPL at checkout
• The cost is divided into installment loans or interest‑free repayment options
• Automatic reminders and direct debits manage payment obligations
• Apps track balances, spending and upcoming payments.

While designed to feel simple, BNPL credit contracts still form part of your financial story.

BNPL may impact your credit score and credit exposure through:

• Credit checks or credit applications when you open a BNPL account or request a higher spending limit
• Missed payments, late fees or payment obligations that escalate to debt collection
• Defaults listed on your credit file through credit reporting bodies
• Holding multiple BNPL loans or short‑term credit facilities at once
• Using BNPL frequently for discretionary spending alongside other debts.

While BNPL doesn’t always contribute positive data under Comprehensive Credit Reporting, negative activity can still influence credit scoring models used by credit reporting bureaus and lenders.

Yes. But afterpay didn’t always affect credit scores in the same way as other consumer finance or short‑term lending solutions, but that has changed under Australian credit laws.

Buy Now Pay Later regulation changes in Australia (2025)

From 10 June 2025, Buy Now Pay Later providers were regulated under the National Consumer Credit Protection (NCCP) Act, just like traditional lenders.

This means BNPL providers must:

• Hold an Australian credit licence with ASIC (Australian Securities and Investments Commission)
• Follow responsible lending obligations
• Cap late fees
• Be a member of AFCA (Australian Financial Complaints Authority)
• Meet clearer standards around credit reporting and debt collection, giving consumers more protection.

In practical terms, BNPL now looks much more like other credit products in the eyes of lenders.

From June 2025, Afterpay and other buy now pay later services must operate under the National Consumer Credit Act and responsible lending obligations. This means:

• Afterpay may perform a credit check or credit inquiry when you sign up or increase your spending limit
• These checks can be visible to credit reporting agencies and other credit providers
• Missed payments may lead to credit reporting, debt collection or credit infringement listings.

Afterpay currently does not report positive repayment history, but missed payments, repeated hard credit inquiries or defaults can still damage your credit profile and borrowing capacity.

BNPL providers must tell you upfront whether they will conduct:

• Soft credit checks, which don’t affect your credit score
• Hard credit inquiries, which appear on your credit file and credit bureau data.

Multiple BNPL credit checks or credit applications in a short period can increase your credit risk profile and raise concerns for lenders reviewing your bank statements, financial records or credit agreement history.

One in seven credit card holders (14%) have used buy now pay later services in the past four weeks, with usage rising to 22% among renters and 16% among mortgage holders.

Roy Morgan, Nov 2024.

If you miss a payment:

• Your BNPL account or payment services may be paused
• Late fees or penalty charges may apply
• The debt may be referred to debt collection or credit repair pathways
• A default may be listed on your credit file via credit reporting companies such as Equifax Australia.

In Australia, a default can be listed if the debt exceeds $150 and is more than 60 days overdue, after proper notice. Defaults can remain on your credit report for up to two years and influence future credit products, including mortgages and car loan approval.

Do you need help talking to creditors? Read our full guide here: How to talk to creditors.

BNPL fees and charges to be aware of

Buy now pay later services are often marketed as interest-free, but that doesn’t mean they’re fee-free. Under Australia’s consumer credit laws, BNPL fees are now regulated, including caps on late payment fees and limits on how much you can be charged in a 12-month period.

Where BNPL can become costly is when payments are missed. Late fees may apply, accounts can be paused, and unpaid balances can be referred to debt collection. There can also be flow-on costs, such as bank overdraft fees or interest charges if repayments are made using a credit card.

These fees don’t just affect your wallet. They can add pressure to your budget, increase the risk of missed payments, and contribute to the very credit issues many people are trying to avoid.

If you need help cleaning your credit report, check out this article: How to clean your credit report and repair your credit score.

Mortgage lenders, mortgage brokers and credit providers may assess:

• The number of BNPL loans or interest‑free payment options you use
• Your repayment history and credit habits
• Your overall borrowing power and borrowing capacity
• Whether BNPL is used for essentials or discretionary spending
• Your wider financial commitments and credit exposure.

Even small BNPL balances can lower your borrowing ability. They can also delay mortgage approval if they show cash-flow problems or a possible debt spiral.

If you choose to use BNPL, these habits can help protect your credit score and financial profile:

1. Limit yourself to one BNPL provider
2. Treat BNPL like any other credit facility in your budget
3. Avoid relying on BNPL for high‑interest debts or everyday essentials
4. Don’t use BNPL to cover existing credit card payments or loans
5. Set automatic reminders to avoid missed payments.

If BNPL is becoming a regular solution rather than a convenience, it may signal emerging financial hardship.

Among Australians who don’t pay off their credit card each month, the median amount owed is $1,037, rising to $1,342 for mortgage holders and $911 for renters.

Roy Morgan, Nov 2025.

If you’re concerned about BNPL credit impact, consider safer alternatives:

• Budgeting: understanding your spending, services and bank statements
• Saving first: building buffers for short‑term costs without short‑term credit
• Debt consolidation: addressing high‑interest debts before they spiral.

Reducing reliance on interest‑free deals can improve long‑term financial wellbeing.

Try using MyBudget’s free Personal Budget Template or Savings Goal Calculator to help you plan for upcoming expenses without relying on short-term credit.

If you want to find out more about debt consolidation, read more here: Debt consolidation: is it right for you?

For over 25 years, MyBudget have helped more than 130,000 Australians improve their financial wellbeing by:

• Managing bills and credit services
• Reducing high‑interest debts
• Improving credit habits and credit profiles
• Building savings so BNPL loans and short‑term lending solutions aren’t needed.

You can enquire online or call 1300 300 922 to speak with one of our expert Money Coaches about a more sustainable approach to managing money.