If you've been shopping online recently, you've probably come across Affirm as a payment option at checkout. Affirm is a "buy now, pay later" service that allows you to pay for purchases in installments over time. But you may be wondering - does using Affirm impact your credit score?
The short answer is: that it can, both positively and negatively depending on how you use it. By reporting your payment activity to the major credit bureaus, Affirm has the potential to help build your credit history if you make consistent, on-time payments. However, late or missed payments could hurt your score.
Here's a closer look at how Affirm can impact your credit:
Potential Positive Impacts on Credit
- Builds credit history for those with a thin file
- Adding a new account can increase credit mix diversity
- On-time payments help demonstrate responsible credit usage
- Keeping balances low compared to total limits is favorable
If you're new to credit or haven't had active accounts in some time, using Affirm responsibly can help validate that you're a dependable borrower. Your Affirm plan gets reported to Experian, and your payment activity is part of your credit history. Consistently paying on time shows lenders you can manage different credit types.
Potential Negative Impacts on Credit
- Late or missed payments get reported and can drop scores
- Carrying high balances could increase the credit utilization ratio
- Too many new accounts opened at once may temporarily drop scores
- Delinquent Affirm accounts could get sent to collections
Like any other credit account, paying at least the minimum amount due by the due date is crucial. Payment history is the biggest factor affecting credit scores, so a string of late Affirm payments will likely cause your scores to drop. Additionally, running up too many high balances across open credit lines can make you appear overextended to lenders.
While adding one new Affirm plan may not have much impact, opening several at the same time could ding your scores slightly in the short term due to increased hard inquiries and reduced average age of accounts. Most importantly, defaulting on an Affirm purchase could lead to the account being handed over to collections, which can heavily damage scores.
Using Affirm Responsibly
The key to ensuring Affirm is helpful rather than harmful to your credit scores is using it responsibly:
- Only take on what you can afford - don't overextend yourself
- Make at least the minimum payment on time each month
- Pay extra when possible to minimize interest charges and keep balances low
- Periodically check your credit reports to monitor new accounts and payment recording
By treating Affirm like any other credit card or loan, and making consistent payments as agreed, it can be a useful tool to build your credit history and improve your scores over time. As long as you don't take on more debt than you can handle, Affirm likely won't hurt your scores.
However, using multiple "buy now, pay later" services at once, falling behind on minimum payments, or allowing accounts to go delinquent can quickly offset any credit-building benefits of Affirm. Being a responsible borrower is key to maintaining good credit scores.
So in summary - yes, Affirm can affect your credit scores, boosting them if you use it as agreed or potentially damaging them if you fall behind. As with any credit product, it's simply a tool that can help or hurt your credit depending on how wisely you wield it. Understanding what gets reported and following good payment practices can make Affirm a positive part of building a healthy credit profile.
Call on (888) 803-7889 to know more about your credit score now!
Resource
Credit cards for bad credit December 2022
Credit repair companies: What to look for in 2023?
Credit Card Tips to Help Prepare for the Christmas holiday
