Does Buy Now, Pay Later Hurt or Help Your Credit in Canada?

How Does Buy Now Pay Later (BNPL) Affect My Credit Score?

It depends. Not all BNPL services are created equal, and not all of them impact your credit score the same way. Let’s break it down for you clearly.

1. What Are BNPLs?

BNPL stands for Buy Now, Pay Later. It’s a flexible payment option that lets you split your purchase into smaller, more manageable installments. Instead of paying the full amount upfront, you can spread the cost over weeks, months, or even years—often with no interest or low interest.

Think of it like a short-term loan—except it’s more convenient and often offered right at checkout online or in-store.

2. What Services Do BNPL Companies Offer?

BNPL companies typically offer three types of services:

A. Buy Now Pay Later (No Interest – Short Term)

This is the most common and widely used BNPL service. It allows customers to split their payments into smaller chunks over a short period (usually 4–8 weeks).

Example:
Let’s say you want to buy an event ticket or a hotel booking worth $500. Instead of paying all of it now, you could pay:

• Today: $100

• In 2 weeks: $100

• In 4 weeks: $100

• In 6 weeks: $100

• In 8 weeks: $100

Key Points:

• No interest is charged.

• Great for small to medium-sized purchases.

• Fast approval process—often without a full credit check.

These short-term, no-interest BNPL plans are not usually reported to credit bureaus, so they do not show up on your credit report — and therefore do not help or hurt your credit score.

B. Buy Now Pay Later (With Interest – Medium Term)

This type of BNPL plan applies to purchases paid over 6 to 12/24 months. Interest is added to your payments, making it more like a traditional loan.

Key Points:

• Usually requires a credit check.

• May show up on your credit report.

• Treated more like a short-term personal loan by credit bureaus.

These are more structured like personal loans. Because there’s an interest component, the lender may treat this as a credit product and choose to report it to the credit bureaus.

C. Buy Now Pay Later (With Interest – Long Term)

These plans are designed for large purchases like furniture or appliances. They typically span 12 to 36 months or more.

Key Points:

• Almost always reported to credit bureaus.

• Requires full credit qualification.

• Treated similarly to other installment loans on your credit report.

These plans are typically reported to credit bureaus. Because they act like installment loans, they become part of your credit history and affect your debt-to-income ratio. Making on-time payments can improve your credit, but missed payments can lower your score.

3. How Does BNPL Affect My Credit Score?

Let’s explore the impact based on the 3 categories:

A. BNPL (No Interest – Short Term)

• Most BNPL companies do not currently report these short-term payments to credit bureaus.

• Even though they may do a soft credit check during approval, this doesn't impact your credit score.

• However, if you miss payments, and the account goes into collections, it can negatively affect your credit.

Important:

Credit bureaus like Equifax and TransUnion want this information to be reported. But many BNPL providers are still refusing to submit short-term data because they fear it could harm customers’ scores unfairly.

Read more: Axios article on BNPL reporting reluctance

B. BNPL (With Interest – Medium Term)

• These plans may appear on your credit report.

• Timely payments can help build your credit.

• Missed or late payments can hurt your score.

• Treated like any other small personal loan.

C. BNPL (With Interest – Long Term)

• Always reported to credit bureaus.

• Helps you build credit if managed well.

• Poor repayment behavior will impact your score just like any other loan.

This type of BNPL has the biggest impact on your credit profile—positive or negative.

Final Thoughts

BNPL can be a smart way to manage your cash flow, but only if used responsibly.
Understand the terms, know what type of BNPL plan you’re signing up for, and most importantly—never miss a payment.

And as credit reporting rules evolve, stay informed. The BNPL industry is still young, and changes are happening fast.

A customer at a trendy clothing store selects her items and heads to checkout. Instead of paying the full amount upfront, she chooses the 'Buy Now, Pay Later' option—splitting her $300 purchase into manageable bi-weekly payments. Quick approval, no interest, and no credit impact... or so she thinks.
(Image from Unsplash)