How Afterpay Services Can Affect Your Credit Score
Ever since AfterPay was introduced, it offered convenience in the way we shop. All of a sudden, we have another option for flexible payment available that allows us to pay back the total purchase price in four instalments. While it is convenient to have AfterPay available, it can bring more damage than good if you're thinking of applying for a home loan.
Coronis Financial Services Director Tyson James said that while buy now, pay later services, may seem convenient; it can give the impression that you don't have enough savings available to live pay to pay.
"There's a real testament that 'pay later' service users tend to have more types of debt and they are more likely to have been declined for credit cards in the past, that's why they resorted to services like Afterpay," he said.
"As a result, it prompts credit assessors to consider certain scenarios when reviewing a home loan application for these users like whether you are living within your means, have enough available savings, or if you're living pay cycle to pay cycle.
"Overusing Afterpay can make your application look like you're living above your means, which has a negative impression on your profile when you apply for a home loan."
With no fees and simple approval process, it's easy to see why Afterpay is so popular. While there are a lot of users who use it within their means, there are also a lot of users to get themselves into bigger debt. The buy now, pay later option can have an impact on your existing accounts and your credit history, especially if you make repayments from your credit card.
If you're using services like Afterpay, you should look at it as short-term means for repaying rather than rely on it. With tightened lending restrictions, it can be harder to have your application approved. There are even some stories of applicants being denied for a home loan because they spent too much money on UberEats. So if you want to apply for a home loan, you should be extra careful with your finances and be wise with your spending.