The Afterpay Conundrum: Balancing convenience with homeownership

Afterpay makes shopping a breeze, but you might be wondering what impact (if any) your habits will have on your credit score. If buying a house is on the cards and you’re considering a home loan, here’s what’s up.

» Your credit score, income and expenses play a role in your loan eligibility

» Having an Afterpay account does not build credit, but you can’t hide Afterpay debt

» RentPay’s Scorebuilder feature can help build your credit score

What do lenders consider when you apply for a home loan?

» Your credit score: Your credit score is a significant factor when applying for a home loan and can make or break a deal. The higher your score is, the more likely you will have your home loan approved.

» Your income: What you earn determines your loan affordability. Most lenders will consider your savings and other assets, such as a car or other properties you own.

» Your expenses: A bank might ask you to list your monthly expenses, including what you spend on essentials like groceries, debt repayments and utilities. They may also request information about lifestyle spending, such as streaming services or Buy Now Pay Later (BNPL) services like Afterpay.

Does Afterpay affect my credit score?

Afterpay says their service does not affect your credit score. Their website says they “never do credit checks or report late payments”. That said, this doesn’t mean your Afterpay habit won’t affect the outcome of your home loan application.

While Afterpay might be chill about not reporting late payments, you can’t hide any Afterpay debt from a lender because they will ask for bank statements, and any outstanding balance may factor into their decisionmaking process.

But will using Afterpay build my credit score?

It's important to note that BNPL companies like Afterpay are not considered credit providers, as they are not regulated under the National Consumer Protection Act 2009 or NCCP Act. Using Afterpay responsibly and making timely repayments won't impact your credit score.

But it’s also worth noting that having an Afterpay account won't help you build credit. While making payments on time is essential to avoid any negative impact, it won't count as positive credit behaviour as it's not reported to credit bureaus. This contrasts with credit cards and other loan repayments, where positive behaviour is reported and can help improve your credit score over time.

What happens if I miss an Afterpay repayment?

It's important to know that lenders can review your repayment history when assessing your home loan application, so missed or late Afterpay payments can impact your credibility. Additionally, late payment fees charged by Afterpay will appear on your bank statements and could raise red flags with potential lenders.

Pay off your Afterpay debt on time and in full to avoid any negative impact on your creditworthiness. If you're struggling to make payments, contacting Afterpay and discussing alternative arrangements rather than risking harming your credit score is better.

Pro tip: Avoid using a credit card to pay off your Afterpay balance, as this could be seen as a sign that you're not managing your finances responsibly.

How can I build my credit score as a renter?

Regular repayments should count towards your creditworthiness - especially if you aim to become a homeowner. That's why we created Scorebuilder, a feature of RentPay.

Each month you hold an open Scorebuilder line of credit, we’ll report your account status to one of Australia’s largest credit reporting bodies. If you’re diligent about paying back what you borrow, your credit score may improve.