Buy Now Pay Later Purchases

Prospective property buyers are jeopardising their chances of securing a home loan because purchases made through buy now pay later (BNPL) facilities are hurting their credit score, says a leading Queensland finance brokerage.

Borro™ owner Cara Giovinazzo said lenders had been taking a harder line on BNPL activities and just a couple of transactions could significantly lower credit scores and reduce borrowing capacity or obtaining a loan approval.
“We are seeing BNPL facilities are now appearing on client’s credit reports and significantly reducing their credit scores, which was not the case in the past,” Ms Giovinazzo said.
“Previously, BNPL facilities did not show up on your comprehensive credit reporting, so it was a good option to utilise when you wanted to purchase larger items online and pay it off, usually over 4-6 smaller fortnightly repayments.

“But buyer beware! While it has looked like an easy and convenient way to purchase items, particularly in these times of cost-of-living increases and rising interest rates, you need to consider the impact it has on obtaining credit in the future, as lenders are now treating BNPL very differently.”

Ms Giovinazzo said the ability for consumers to obtain credit to make purchases and pay them off without accruing interest had enhanced the popularity of BNPL.

“However, they can now significantly affect your ability to get credit,” she said.

“When you start an application with a BNPL facility and even if you don’t proceed or aren’t approved, this is recorded on your credit score and reduces your score by approximately 50 points.

“On average, you start with a credit score in the 700’s. A lot of lenders want you to have a score above 600. If you do two or more BNPL credit inquiries, you could severely impact your ability to get a home loan. Ongoing conduct is also now being reported to credit reporting bodies. If you have missed a repayment or had conduct issues on your BNPL facility, this could significantly reduce your score and when applying for credit, you will have to explain the reasons behind the late payment. A lender could decline your application based simply on the conduct of the BNPL facility.

“This is also affecting borrowing capacity. Previously, lenders saw BNPL facilities as an extension of declared living expenses. If you were declaring $500 a month on clothing, and had $500 on your BNPL facility, they would not consider the BNPL facility a liability. Now, most lenders are adding it as an ongoing liability, even if you owe nothing on it, which is reducing the amount of money you can borrow.”

Further inquiries: Cara Giovinazzo m: 0409 463 850 p. 1300 1 BORRO™


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