Consumers are being cautioned that using ‘buy now, pay later’ (BNPL) services could have an impact on their credit score. Sharing the warning, Citizens Advice explained that the services are credit products. Missing payments could therefore impact your credit score.
In an Instagram post, Citizens Advice said: “Buy Now Pay Later services are credit products, and missing payments on them can affect your credit score! Our advice could help if you’re struggling with debt or feeling overwhelmed by your payments.”
If you choose to use a BNPL scheme, it’s advised to read the T&C’s. In another social media post, Citizens Advice urged people to always check how much they will have to repay and when.
In a Facebook post, the experts warned: “Buy Now Pay Later can be a useful way of spreading the cost of large purchases, but failure to make your payments will impact your credit score, and you could be referred to debt collectors.” Citizens Advice added: “Always read the T&C’s, and make sure you know how much you’ll have to repay and when!”
National Debtline similarly warns that BNPL services could put people at risk. Guidance on the website explains: “There is a risk that you may be tempted to purchase an item which would otherwise be unaffordable. You are also more likely to spend more, thinking you’ll be fine paying it back in the future.”
At the time of writing, the Financial Conduct Authority (FCA) does not regulate all ‘buy now, pay later’ services. New regulations will come into force in July, reports the Mirror.
FCA’s website explains: “When you shop online or in store, some businesses offer customers a Buy Now Pay Later option for their items. There are currently two types of Buy Now Pay Later; one which we already regulate, and another known as Deferred Payment Credit (DPC).
“DPC is an interest-free form of credit, repayable in 12 or fewer instalments, over 12 months or less. Right now, DPC agreements aren’t regulated, which means lenders don’t need to be authorised by us or follow our rules.