“Buy Now, Pay Later” (BNPL) makes shopping effortless—you get the product now and split payments over weeks or months. But while it feels like a free credit line, it’s still a form of borrowing. What most users don’t realise is that BNPL activity is now reported to credit bureaus, meaning it can directly impact your credit score—for better or worse. Here’s how it really works.
How BNPL works
BNPL services partner with merchants and let you pay for purchases in instalments, often with zero or low interest for short periods. Providers like Amazon Pay Later, LazyPay, ZestMoney, and Simpl check your basic KYC and approve small limits—usually Rs 10,000 to Rs 1 lakh. You repay in instalments ranging from 15 days to a few months.
How it affects your credit score
Until recently, many BNPL transactions weren’t reported to credit bureaus, but now most providers report both your repayment history and loan activity to agencies like CIBIL and Experian. That means missed or delayed BNPL payments are treated just like late credit card payments—they hurt your credit score.
Paying on time, however, can build a positive history, especially if you’re new to credit and don’t have a credit card yet. Regular, disciplined BNPL repayments show lenders that you’re responsible, helping you qualify for bigger loans later.
The hidden risks
BNPL makes it easy to overborrow because approvals are fast and feel small. But multiple active BNPL accounts can quickly add up, raising your total debt and lowering your credit score through high credit utilisation. Also, missing a payment can lead to late fees, interest, and even collection calls—exactly like a loan default. Some fintech firms report defaults within weeks, which can drop your CIBIL score by 50-100 points.
What lenders see
When you apply for a new loan, lenders can now view your BNPL accounts, outstanding balances, and repayment records in your credit report. Multiple BNPL lines or frequent short-term borrowing can make you look credit-hungry, which may reduce your chances of getting bigger loans like a car or home loan.
How to use BNPL wisely
· Use only one or two BNPL accounts instead of many.
· Pay all instalments before the due date—set reminders or auto-pay.
· Track your total outstanding balance across apps; don’t spend more than you can repay easily.
· Avoid revolving BNPL limits—close them once paid to reduce your credit exposure.
· Check your CIBIL report every few months to see if BNPL accounts are showing correctly.
When BNPL helps
If you’re new to credit, using BNPL responsibly can help build your first credit history. Consistent, on-time repayments for 6-12 months can improve your credit score and open the door to regular credit cards or personal loans.
Bottom line
BNPL isn’t harmless pocket credit—it’s real borrowing that now counts toward your credit score. Use it like a short-term loan: repay on time, avoid juggling too many accounts, and track your limits. Used wisely, it can build your credit footprint; used carelessly, it can hurt it faster than you think.
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