Buy-It-Now and Pay-On-Pay programs have become increasingly popular with buyers in the UK, but payment plans can hurt credit scores if not used properly.
Payment systems like Klarna and Clearpay have had a huge impact on the fashion industry, making it more accessible between paychecks.
However, the experts at Norton Finance have warned that missed repayments can remain on a credit report for six years and that overuse of credit programs can be seen as problematic for lenders.
Having a good credit rating is very important when making big financial decisions, such as applying for a loan.
Credit scores are used to determine lender eligibility and there are many factors that can damage them, including the use of buy-now and pay-back programs.
The plans are easy to use and extremely beneficial when cash flow is an issue or you want to try something before committing to the cost.
Misused and consumers can find themselves in a circle of debt-like and hard-to-come-out repayments.
Norton Finance has come up with their top three tips for maintaining a good credit rating while using Buy Now and Pay Later:
- Always make repayments on time – late payments are detrimental to credit scores.
- Avoid opening too many credit accounts at once – too many active credit accounts are a red flag for lenders.
- Borrow only what you can afford to repay and borrow rarely – this helps show lenders that you are a responsible borrower.
The UK spent fifty-three billion thirteen million pounds on clothing in 2020 and with the ability to buy now and pay later, it’s no surprise that 22% of users buy now pay later have seen their credit scores negatively affected by their online shopping habits. .
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