In today’s cost-of-living crisis, ‘Buy Now, Pay Later’ (BNPL) services like Clearpay offer a convenient way to manage shopping expenses. However, at Marsh Finance, we believe it’s crucial to understand how these services, including Clearpay, can impact your credit score, especially when considering important financial commitments like car finance. It’s important to state that Marsh Finance is not affiliated with Clearpay, and this article is intended for educational purposes only.
Understanding ‘Buy Now, Pay Later’ Services
Does Clearpay Affect Your Credit Score?
Government Oversight on BNPL Services
Credit Reference Agencies in the UK
Understanding ‘Buy Now, Pay Later’ Services
BNPL services like Clearpay allow you to defer payments for purchases, either in interest-free instalments or as a lump sum at a later date. This payment method has gained popularity, offering temporary relief from immediate expenses. However, its impact on your credit score is a topic that requires attention.
Does Clearpay Affect Your Credit Score?
Using Clearpay or similar BNPL services can affect your credit score, but it depends on a few factors. Missed payments or defaults on your BNPL agreements can be reported to credit bureaus. They may stay on your credit report for up to six years, potentially hindering your ability to secure future credit, like loans or mortgages.
Payment Reporting by Clearpay
As of now, Clearpay does not report on-time repayments to credit bureaus in the UK. While using Clearpay responsibly won’t necessarily boost your credit score, missed payments can have negative implications.
Hard vs. Soft Credit Checks
Clearpay performs a soft credit check when you sign up, which doesn’t impact your credit score and isn’t visible to other lenders. This is in contrast to other BNPL providers like Laybuy, which conduct hard credit checks that can affect your credit score and are visible on your credit report.
Want to learn more about the differences between soft and hard credit searches? Check out our article here.
Government Oversight on BNPL Services
The UK government has announced plans to regulate BNPL services more stringently, with potential changes coming in 2024. Some providers have already started sharing data with credit reference agencies, which could affect your credit score based on your payment behaviour.
Credit Reference Agencies in the UK
The UK’s three major credit reference agencies – Experian, Equifax, and TransUnion – compile reports that reflect your credit management skills. A high credit score can enhance your chances of obtaining favourable credit terms, while a low score can lead to higher interest rates or denied applications.
Improving Your Credit Score
While Clearpay doesn’t directly help in improving your credit score, responsible management of finances, including timely BNPL repayments, contributes to good financial habits. Regularly monitoring your credit report and addressing discrepancies can help maintain a healthy credit score.
Managing BNPL Services Responsibly
If you choose to use Clearpay, ensure that you manage your repayments effectively to avoid negative impacts on your credit score. Keep in mind that excessive reliance on BNPL services or failure to meet repayment obligations can lead to financial strain and credit score damage.
Your Partner in Car Finance
At Marsh Finance, we’re committed to helping you navigate your financial journey. Our car finance calculator and 30-second pre-approval process provide a seamless experience in applying for car finance. Additionally, our car marketplace offers an extensive selection of vehicles, allowing you to find and finance your dream car in one place.
In a Nutshell
Understanding the relationship between BNPL services like Clearpay and your credit score is crucial for making informed financial decisions. While BNPL can offer short-term financial flexibility, using these services wisely is important to maintain a healthy credit score, especially when considering larger financial commitments. Marsh Finance is here to support you with tools and resources to manage your financial health effectively. 🚗💡📈💳
Finance is subject to status
Representative Example
Rates from 12.9%
Representative example: borrowing £10,000 over 60 Months with a representative of 23.0% APR, an annual interest rate of 23.0% (fixed) and a deposit of £0.00, the amount payable would be 59 repayments of £269.58 per month, with one final repayment of £279.58 (which includes the option to purchase fee of £10.00), with a total cost of credit of £6,184.80 and a total amount payable of £16,184.80. Marsh Finance Limited are a lender, not a broker.
Marsh Finance Limited are a lender, not a broker.
This is for illustrative purposes only and is not a quote or an offer of finance.