I use Afterpay, will it affect me if I apply for a loan? Will Afterpay affect my credit score? & does my Afterpay account history stay on my credit score forever? We had a chat to the team at Fife Financial Services Goulburn & they gave us some helpful insight into the current Finance Market & the modern lay-by app ‘Afterpay’.
What is Afterpay?
Afterpay has been described as "modern day lay-by" — except customers can take home their goods immediately, instead of having to wait until all their instalments have been repaid. The application structure is instant loan approvals up to $500 with no necessary credit history checks & late repayments incur late fees.
How does Afterpay affect my Loan Application?
A credit score is a point structured system where your credit enquiries are marked and are accountable for 5 years. Afterpay is a form of credit and is recognised as a small credit card by financial assessors. AfterPay is advertised as a win-win application tool to assist in buying goods & services, however it does have an impact on your credit score regardless of whether you pay on time or not.
You may have heard about The Royal Commission in the media recently. The Royal Commission is an investigation into misconduct in the Banking, Superannuation and Financial Services Industry which was established in December 2017. Since the Royal Commission, lending money has become a lot harder than it was 18 months ago. Essentially, there are a lot more boxes to tick on a loan application than there has ever been.
For example: While Afterpay repayments may be paid on time The banks are asking the question: You are asking the bank to lend you hundreds of thousands of dollars but you need to borrow $200 for a pair of shoes? It’s not fact that you’ve paid your repayments on time, the point is – why do you need to use Afterpay to spend $200? The banks will lose confidence in you for borrowing money for minor expenses.
Should I Stop Using Afterpay?
Afterpay is not necessarily a bad thing, it is just something to be mindful of, especially if you’re thinking of getting into the property market. When applying for a loan, to ensure your application process is lodged quickly & correctly, you need to ensure you provide your lender/broker every document possible that relates to your finance - including your Afterpay statement if you use the application.
While Afterpay is very common, there are many digital credit services that have a similar structure to Afterpay such as Zip Pay, Affirm & Open Pay.
If you’re worried about the effects of Afterpay or you’re interested to know more about your credit score give the team at Fife Financial Services Goulburn a call on 4822 8666.