Share this
by Marsh Finance on Aug 2, 2024 11:19:01 AM
The rising cost of living has left a lot of us struggling with money. As a result, "Buy Now, Pay Later" (BNPL) services like Clearpay have become very popular.
Clearpay is a service that lets you buy things and pay for them later. It's like a loan, but it's different.
This article is for information only, Marsh Finance isn't partnered with Clearpay. Let's answer the important question, does Clearpay affect your credit score.
Understanding ‘Buy Now, Pay Later’ Services
BNPL services like Clearpay are really popular, and we understand why. You can choose to pay for an item or service over a few months or as a lump sum, allowing you to spread the cost. However, it's important to understand how BNPL can impact your credit score.
Can Clearpay Hurt My Credit Score?
The short answer is that it depends.
If you miss a payment, it can hurt your credit score. Bad credit can make it harder to get loans or buy a house.
How can I use Clearpay safely?
- Pay on time: This is very important.
- Don't spend too much: Only use Clearpay for what you can afford.
- Consider other options: If you're worried about your credit score, using a credit card might be better.
Hard Vs. Soft Credit Checks
Clearpay usually does a soft credit check when you sign up. A soft credit check gives a summary of your credit report.
This is good because it doesn't show up on your credit score. But some other BNPL services might do a hard credit check, which can hurt your score.
Want to learn more about the differences between soft and hard credit checks? Check out our article here.
Credit Reference Agencies In The UK
The UK has three major credit reference agencies: Experian, Equifax, and TransUnion.
They make reports about your credit history and how well you manage your money. A good credit score makes it easier to get loans.
Improving Your Credit Score
Using Clearpay won't help improve your credit score, unlike credit cards.
A credit card is much better for building your credit than Clearpay. When using it properly, Clearpay has no impact on your credit score. However, if you miss payments, Clearpay could damage your credit score if you’re not careful.
Credit cards help you build your credit score by showing your payment history and demonstrating your ability to manage your credit limit and money well.
Yes, credit cards have drawbacks like costly late fees and interest on unpaid invoices, but these can all be avoided if you use your credit card wisely. Ultimately, the benefits of using a credit card outweigh the risks.
Managing BNPL Services Responsibly
If you use Clearpay, make sure you can pay on time. Before buying something through Clearpay or a BNPL service, be sure to ask yourself if you actually need the item.
BNPL services have even started appearing on takeout services like Deliveroo - do you really need that pizza?
Relying too much on Clearpay and other BNPL services can be bad for your finances.
We're Here To Help!
At Marsh Finance, we're here to provide helpful hints and tips to help you manage your money better. If you're looking for car finance, check out our car finance calculator before you apply!
Finance is subject to status.