What buy now pay later (BNPL) actually is
BNPL lets you spread the cost of something over weeks or months. But the payments are small. There’s usually no interest if you pay on time, so it can seem like a great help if you're short on funds to pay outright. However, it still counts as borrowing, even if it feels like normal shopping.
Lenders are now able to see more BNPL activity on your credit file which means they’ll take it into account when they look at your application.
How buy now pay later affects your credit file
Some BNPL companies now report borrowing to credit reference agencies. This means late payments can appear on your report. Any missed BNPL payments can make a lender think you are more of a risk.
Even when payments don’t appear on your credit file, the lender can still see BNPL spending from your bank statements which means they can still factor it in.
How lenders look at buy now pay later
Lenders want to see that you can manage your money and are living within your means. BNPL makes this harder to judge because it adds extra outgoing payments on top of your usual spending.
A lender may:
- Count BNPL payments as regular commitments
- Reduce how much you can borrow if BNPL takes up part of your spare income
- Question your spending choices if BNPL is used often
Small payments may not cause too much trouble but lots of BNPL agreements at the same time might suggest you rely on short-term borrowing.
How buy now pay later can reduce your borrowing power
Your income and outgoings help the lender work out what you can afford. If you have several BNPL plans running at once, this reduces the money you have left each month.
This can lower the maximum mortgage amount offered. It can also affect your application if the lender feels you may struggle to keep up with mortgage payments once BNPL is included.
What happens if you miss a buy now pay later payment
Missing a BNPL payment can be a bigger problem than many people think. It can trigger:
- Late payment markers on your credit file
- Extra charges
- Concerns from a lender about how well you handle credit
Even one late payment can make your mortgage application harder. Several missed payments will make things much more difficult.
Using buy now pay later just before applying
Using BNPL just before applying for a mortgage can make the lender think your finances are stretched. They may wonder why you needed to spread the cost and ask questions about your financial health even if the payments are small.
Some lenders also look at bank statements for the last three to six months. Recent BNPL activity will show up there.
What you can do if you use buy now pay later
You don’t always need to stop using BNPL completely, but it helps to plan ahead.
- Try to pay off any active BNPL balances before you apply
- Avoid taking out new BNPL plans in the months leading up to the application
- Make all payments on time
- Keep your general spending steady and easy to follow on your bank statements
These steps can help show the lender that you have full control of your money.
When buy now pay later is unlikely to cause problems
If you:
- Use BNPL rarely
- Always pay on time
- Have only one or two small plans
- Can show stable spending
The main issues come from regular use or missed payments.
BNPL can be useful, but it still counts as borrowing. Lenders can see it, even when it doesn’t appear on your credit report. Lots of BNPL plans or any missed payments can lower how much you can borrow and can make your application more difficult.
Taking a bit of care with BNPL in the months before you apply can make your mortgage journey much smoother.
