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Does Afterpay Affect Credit Score?

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Comparison rate3

7.64 %
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Does AfterPay Affect Credit Score?

Over the past few years, buy now, pay later services like Afterpay, ZipPay, and Zip Money have cemented their place as the preferred payment method by consumers across the country, which begs the question: does Afterpay affect credit score? Does ZipPay affect credit score? What about Zip Money

 Having a clear understanding of the types of credit you are using – and how they can impact your credit score – is crucial to maintaining a good borrower profile.

What are buy now pay later services?

Buy now, pay later (BNPL) services allow customers to purchase goods and services and pay for them at a later date, instead of paying the full purchase price upfront. 

This is facilitated through the provision of access to a limited amount of credit per customer. At the time of purchase, the BNPL provider pays the full cost of the item or service to the vendor. These costs are then deducted from the credit available to the customer and recouped through deductible instalments. 

The concept has been likened to a modern version of lay-buy, except BNPL customers can take the goods home or enjoy the service – such as a haircut, beauty treatment, or car service – immediately, instead of waiting until it has been paid off. 

Currently, the most popular BNPL services in Australia are ZipPay, Zip Money, and AfterPay. 

How do buy now pay later services work?

While the premise and purpose of each buy now, pay later service is the same, the way they operate can be markedly different. 

ZipPay and Zip Money permit customers to purchase without paying anything upfront.  ZipPay also offers functionality where customers can use their credit to pay utility bills via BPAY and fund subscriptions – a hugely popular and unique feature.  At a minimum, ZipPay requires a monthly repayment and charges a nominal monthly account fee if the balance is not paid in full. To support prompt payment, they allow consumers to set their own repayment frequency, from weekly to fortnightly to monthly. 

Zip Money (for purchases between $1,000 and $5,000) offers the above benefits, as well as a guaranteed three-month interest-free period on larger purchases. However, once the three-month grace period is up, outstanding balances on Zip Money purchases are charged at a predetermined interest rate (19.9% p.a. at time of writing).

Unlike Zip products, AfterPay divides the total cost of goods or services purchased into four equal fortnightly repayments. AfterPay typically requires the first quarterly instalment to be paid on the date of purchase; however, depending on how regularly you use the service, you may be rewarded with perks such as ‘nothing to pay today’ – i.e., deferment of the first instalment for a fortnight. 

With their payment flexibility, lack of interest charges, and extended interest-free periods – as well as their exclusive rewards and partner offers – buy now, pay later services have become the preferred choice over traditional credit cards.

What is Afterpay?

Afterpay is considered one of the earliest buy now, pay later providers. Founded in Australia in 2014, they’re now a global company, servicing over 16 million customers worldwide. 

The AfterPay model is simple: each purchase you make is broken down into four equal instalments, to be paid fortnightly over six weeks (the first payment is due upon the date of purchase). Payments can be made manually ahead of their due date or are automatically deducted from a linked account. Missed payments will incur an $8 late fee if they are not paid within ten days of the due date. Afterpay does not charge interest or a monthly account fee. 

Does Afterpay do credit checks?

No. Unlike many of its contemporaries, AfterPay does not run credit checks prior to account approval. Instead, the initial credit made available to you is based upon the funds available in your linked account at the time of application. 

Spending limits generally begin at $300–$500 and, if you make your repayments consistently, typically increase over time. 

Does Afterpay affect credit scores?

No – unless you default on your repayments. 

Because Afterpay does not retain the right to run a hard credit check when you apply for an account, your credit score won’t be damaged by an enquiry. However, as a credit provider, they do still have obligations surrounding the reporting of negative credit behaviours such as missed payments and account defaults, which can damage your credit score. 

If you have concerns about your Afterpay repayment behaviour, you can always use the MoneyMe credit score check to ensure your credit is in good health. 

How does credit score work?

The words get thrown around a lot, but if you’re still wondering just what is a credit score, it is a number between 0 and 1,000 (or 1,200 depending on which credit reporting agency you use). It is used by banks and other financial institutions to assess the level of risk associated with lending to you. 

The higher your credit score, the better chances you have of gaining approval for the credit you’re applying for, at a low interest rate. If your credit score is lower, you may be offered less credit than you’d hoped, be given a higher interest rate, or be declined outright. 

But just how is credit score calculated?

Your credit score is calculated from a number of different pieces of information that, together, form your credit history report. This includes the following: 

  • How much credit you have borrowed in the past
  • Your current loans and credit liabilities, e.g., credit cards
  • Your repayment history for any credit cards or loans – open or closed
  • Any credit limits currently in place, e.g., on a credit card
  • How many applications you’ve made in the past, and how regularly
  • Any bankruptcies, defaults, or court judgements attached to your name
  • An estimate of your ability to pay your bills on time 

Using the MoneyMe credit score finder is a simple way to keep an eye on your credit through a free credit history and identify where and how to improve credit score

What affects your credit score?

There are a number of things that can impact your credit score – for better or worse. 

Actions that can instantly damage your credit score include missed payments or defaults, applying for lots of different credit products within a short space of time, bankruptcies or court judgements against your name, and late payments of utility bills and buy now, pay later services. 

Rebuilding damaged credit has never been easier. Thanks to relatively recent changes in consumer credit reporting law, a new reporting method called Comprehensive Credit Reporting now takes into account any positive credit behaviours on your account. That means all of your regular, timely repayments aren’t just serving to decrease your debt – they’re also helping build a more positive borrower profile and increase your credit score.

How to improve your credit score?

The best way to improve your credit score is to demonstrate consistent, positive credit behaviours. You can do this by paying your bills and making repayments by their due date, reducing the lines of credit you are accessing (e.g., multiple buy now, pay later accounts), avoiding payday loans, and not applying for multiple credit products within a short period. Closing any accounts you pay off is also a good way to demonstrate you’re serious about improving your credit. 

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Transparent and
simple pricing

Interest rate

6.25 %
p.a.
to 19.95 %
p.a.

Comparison rate*

7.64 %
p.a.
to 21.32 %
p.a.

Establishment fee

$295 for loans between $2,100 and $5,000

$395 for loans between $5,001 and $15,000

$495 for loans between $15,001 and $50,000

Monthly fee

$10.00

Loan terms

Minimum 1 year

Maximum 5 years

Early exit fees

None

*This comparison rate is based on an unsecured personal loan of $30,000 for a term of 5 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. A $495 establishment fee and $10 monthly fee applies.

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