The Effect of Afterpay and Zip Pay on Your Credit Score

Apr 4, 2022

Buy Now, Pay Later (BNPL) giants After pay and Zip Co (which offer Zip pay) report almost five million customers across Australia and New Zealand combined. So, it’s likely that you’re one of them. But do you know what are the effects of After pay and Zip pay on your credit score?

BNPL products allow you to make a purchase at a shop or online and receive your goods and services immediately, by paying the merchant, or retailer, on your behalf. Once the retailer is paid, you repay your BNPL account via interest-free instalments over a short period, usually in four fortnightly instalments.

But, because the “buy now pay later” model involves credit, does Zip Pay or After pay affect your credit score? In this article, we will explain how BNPL products like After pay and Zip Pay work and whether using them affects your credit score.

How do Afterpay and Zip Pay work?

When you buy a product from a retailer using Afterpay or Zip Pay, the payment processing companies pay the price of the product or service on your behalf to the retailer. The payment arrangement allows you to buy the product now and pay for it later, usually in four fortnightly instalments. The companies don’t charge interest on credit purchases and also don’t charge signup fees.

While Afterpay is not in the business of providing afterpay cash loans, their buy now, pay later service has gained popularity among Australian consumers. Afterpay offers you a credit limit of $500 if you sign up on its website using your debit card. However, if you sign up on its website using a credit card, the company will assess your credit card history and credit limit to determine your creditworthiness before offering you a credit limit. Zip Pay, on the other hand, offers three fixed credit limits of $350, $500, and $1,000.

You can apply for a credit limit from Afterpay and Zip Pay by signing up on their websites. After signing up successfully, you need to fill out an online form and attach your bank statement, Paypal transactions statement, social media account links, and any other requested identification document. The lender company analyses your documents and your social media accounts to verify your identity and conduct due diligence before starting a business relationship with you.

Afterpay and Zip Pay also allow you to sign up on the checkout page of online retailers. All you have to do is to fill out a short online form and questionnaire. After your account is approved, you can then use the payment platforms to make purchases.

By default, repayments are set for four fortnightly instalments, you have the option to change the frequency of payments to whatever period that suits you, within reason. For example, you can set repayment frequency to monthly, weekly, or fortnightly. However, the total monthly instalments must be greater than the monthly minimum. The minimum monthly instalment is deducted automatically via direct debit from your credit or debit card. You can also opt for making additional payments, but your scheduled payments would still be deducted from your account, credit card, or debit card.

What happens if you miss your due payment?

While it may seem attractive to shop using deferred payment facilities of Afterpay and Zip Pay, they also have their own risks. So, what happens if you don’t pay Zippay or Afterpay?

Because these BNPL companies do not charge interest or sign-up fees, they rely on generating their revenue from late payment fees. If you miss a payment for whatever reason, you’re likely to be charged  a late payment fee of around $10.  This late payment fee is then likely to continue to be charged weekly until you pay the outstanding amount that is owed plus the extra from the late payment fees.

What happens if you miss your due payment?

As well as being charged a late payment fee, you’ll also be locked out from paying for new orders with the BNPL company until you pay your overdue payments. It’s also possible that they may not approve you for future purchases either even after you have caught up on all your overdue payments and associated fees.

While the credit limit you can get is small, if you continue to default on your payments for longer periods, the BNPL company might refer your loan to a debt collection company. This could then have an impact on your chances of securing a future loan such as a mortgage.

Do BNPL products affect your credit score?

Although BNPL companies such as Zip Pay and Afterpay provide short-term small credit limits, they can affect your credit score in various ways. However, the exact impact on your credit rating will depend on the service provider you use and the nature of your dealing with it. Here is what you can expect when dealing with Zip Pay and Afterpay:

Does Zip Pay do a credit check?

According to Zip Pay, it has the right to perform a credit check to confirm your ability to repay the debt, while a single credit enquiry shouldn’t have too much of an impact, too many can lower your credit score. Also, if you miss or make a late payment Zip Pay can report this to the credit reporting agencies, which can negatively affect your credit score.

The company offers a maximum credit limit of $1,000 to borrowers who have a good credit history with little to no missed payments. So, if you maintain a clean credit history using Zip Pay, the good news is that this might actually improve your credit score.

Does Afterpay affect credit rating?

In contrast to Zip Pay, Afterpay doesn’t affect your credit score as it neither runs a credit check on you, nor does it report your late payments to credit reporting agencies. However, your account will be disabled temporarily if you miss your due payment. You should note that Afterpay has the discretion to decide whether or not to share your missed or late-payment information with third parties.

Does Openpay affect credit score?

When you register for an Openpay account, the company will verify your identity and check your credit history and credit report to evaluate your creditworthiness. It also can examine your credit score whenever it deems necessary, typically if you modify your Openpay account limit. If you miss a repayment the company may report this information to a credit reporting agency.

Does Zip Pay do a credit check?

While Zip Pay doesn’t do a credit check on every borrower, the company’s website mentions that it may perform a zip pay credit check to gauge the borrower’s ability to repay the borrowed amount. The company uses the services of Illion and Equifax for performing credit checks.

Does Afterpay do a credit check?

According to the company’s website, it does not do credit checks on customers as it provides low-value credit limits for purchases averaging around $150. The company also does not report late payments to the credit reporting agencies. However, the company pauses your account if you miss your due payment. Because the company does not report any of your activity with After Pay, dealing with the company does not affect your credit score.

Does Zippay affect home loan?

As Zip Pay performs credit checks and reports your missed repayments to credit companies, it can potentially have a negative impact on your credit rating. This, in turn, can also deteriorate your chances of home loan approval as it could indicate to creditors that you are struggling to manage your finances adequately.


Afterpay and Zip Pay allow you to make small purchases using small credit limits. These credit limits are interest-free and have easy repayment terms. The maximum credit limit Zip Pay offers is $1,000, and to get this credit limit, the company often does credit checks. Also, the company reports late payments to credit rating agencies, which can impact your credit score.

Afterpay, on the other hand, provides only small credits, usually less than $500. The company does not do credit checks or report missed payments to credit rating agencies. So, dealing with Afterpay does not affect your credit score.

B M Peachey

B M Peachey, has over 15 years of experience investing in property and the stock market, in both New Zealand and Australia. She has a post-graduate degree, with qualifications in Finance and Mortgage Broking and in Accounting and Bookkeeping. She is passionate about ensuring people have access to credible, reliable, and easy to understand information to help them get in control of the life they REALLY want to live.<

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