44% of Buy Now Pay Later customers confused about credit score

Despite Buy Now Pay Later (BNPL) slowly becoming the trendiest way to pay for everyday purchases, there is still a good deal of confusion around what it means for a user’s credit health. 

In fact, according to new research from BNPL company Openpay, 44% of BNPL users don’t understand how the service impacts their credit score. 

However, the research also found that Aussies are generally savvy with understanding why BNPL companies perform credit checks before approving users for an account. 

Openpay found that 76% of users know that BNPL companies can conduct a credit check to assess a customer’s affordability, while 77% understand that applications for BNPL will appear on their credit report. 

Interestingly, more than half (62%) of respondents believe that every BNPL company uses the same affordability assessment, which is untrue. 

"Credit checks and credit scores are a confusing element of the financial system for everyone, particularly when you add cash flow management solutions such as buy now pay later to the mix alongside traditional forms of credit," said chief operating officer at Openpay, Theresa Abela. 

When it comes to building a healthy credit score with BNPL, it seems we still have ways to go. A massive 85% of Aussies believe missing a payment can negatively impact their credit score, while 62% think paying on time via their credit card will help boost their score.

Mortgages and Buy Now Pay Later: A grey area

When BNPL initially launched, one of the major concerns around the service was how it would impact taking out a home loan, as it’s been reported to appear as a query on applications. 

Openpay found that almost 70% of Aussies believe that having more than one BNPL account would hurt their eligibility for a home loan.

According to Abela, it’s up to BNPL companies to make more of an effort to educate their customers on their products if they want the industry to continue to grow. 

"The research showed that only a quarter (26%) of respondents thought BNPL companies made it clear how they would assess plan limits, ability to repay and credit report impacts. At an industry level, it’s simply not good enough,” she said. 

At Mozo, we believe that every Aussie has the right to learn as much as they can about their personal finances. That’s why we compiled our very own guide about how Buy Now Pay Later can impact your credit score.

And if you’re interested in checking out some of the BNPL in the market, head on over to our Buy Now Pay Later feature guide or our BNPL statistics report.