Does Affirm Build Credit? Unveiling the Impact of Buy Now, Pay Later Loans

Does Affirm Build Credit? Unveiling the Impact of Buy Now, Pay Later Loans

Affirm is a financial services company that offers installment loans for consumers to use at the point of sale. This model of purchasing, known as "Buy Now, Pay Later" (BNPL), is rapidly gaining popularity due to its convenience and flexibility. BNPL loans allow consumers to break down a purchase into smaller, manageable payments, typically over a period of weeks or months.

The BNPL industry, represented by companies like Affirm, Klarna, and Afterpay, has seen exponential growth in recent years. This is largely due to the shift in consumer behavior towards online shopping and the increased demand for alternative financing options. However, as with any financial product, it’s important for consumers to understand the potential impact on their credit score.

Affirm, like its peers in the BNPL space, operates a little differently from traditional lenders. Their loan approval process is often quicker and less stringent, making it an attractive option for those who might struggle to obtain credit elsewhere. However, this ease of access naturally raises questions about how using Affirm might impact one's credit.

Understanding Credit Scores

Credit scores are numerical values that lenders use to assess a borrower's creditworthiness. They are determined by various factors, including payment history, the amount of debt owed, the length of credit history, and the types of credit used. Higher scores indicate a lower risk for the lender and typically result in better loan terms for the borrower.

Credit scores can be positively influenced by consistently making payments on time, maintaining a low debt-to-income ratio, and using a mix of different types of credit. Conversely, missed or late payments, high levels of debt, and frequent hard credit inquiries can negatively impact your score.

It’s important to understand that every lender, be it a traditional bank or a BNPL service like Affirm, may have a different impact on your credit score. This is because they often use different credit reporting agencies and may have different policies when it comes to reporting payment behavior.

Does Affirm Build Credit? The Detailed Analysis

The question, "Does Affirm build credit?" is a common one among consumers considering using the service. The answer is somewhat nuanced. Affirm conducts a soft credit check during the loan approval process, which does not impact your credit score. However, it’s important to note that Affirm does not report positive payment behavior to credit bureaus. This means that making your payments on time will not improve your credit score.

However, Affirm can negatively impact your credit score if you fail to meet your payment obligations. Affirm reserves the right to report late or missed payments to credit bureaus, which can result in a lower credit score. Therefore, while using Affirm may not directly build your credit, maintaining a good payment history with Affirm is still crucial to protect your credit health.

The Impact of Klarna on Your Credit

Like Affirm, Klarna is a BNPL service that allows consumers to break down purchases into smaller, manageable payments. But does Klarna affect credit? Similar to Affirm, Klarna conducts a soft credit check, which does not impact your credit score. However, for some of its financing options, Klarna may perform a hard credit inquiry, which can temporarily lower your credit score.

Klarna, unlike Affirm, reports both positive and negative payment behavior to the credit bureaus. This means that if you consistently make your payments on time, you may see an improvement in your credit score. However, late or missed payments can negatively impact your score.

Afterpay and Credit Checks: What You Need to Know

Afterpay is another key player in the BNPL industry. But does Afterpay check credit? The answer is yes, but it's a soft credit check, which doesn't affect your credit score. Afterpay's approval process is based on a variety of factors, including your credit score, but it primarily focuses on your recent transaction history.

Unlike Affirm and Klarna, Afterpay does not report payment behavior—positive or negative—to credit bureaus. This means that using Afterpay will neither help nor harm your credit score, provided you make your payments on time and avoid incurring late fees.

Can Using Afterpay Help Your Credit?

Given that Afterpay does not report payment behavior to the credit bureaus, does Afterpay help your credit? In a direct sense, the answer is no. Your credit score will not improve from making timely payments. However, using Afterpay responsibly can indirectly support your credit health. By using Afterpay to manage your spending and avoid incurring high-interest credit card debt, you can maintain a lower debt-to-income ratio, which is beneficial for your credit score.

Comparing Affirm, Klarna, and Afterpay: Which is Better for Your Credit?

When comparing Affirm, Klarna, and Afterpay, there isn't a one-size-fits-all answer to which is better for your credit. Each of these BNPL services has different policies when it comes to credit checks and reporting payment behavior.

If you’re looking to improve your credit score, Klarna might be the best option since it reports positive payment behavior. However, this also means you need to be extra vigilant about making your payments on time, as late payments will negatively impact your score.

Affirm and Afterpay, on the other hand, won’t directly improve your credit score, but they can indirectly support your credit health if used responsibly. Remember, the key to using any credit product effectively is to understand its terms and to ensure you can comfortably meet your payment obligations.

The Pros and Cons of Using Buy Now, Pay Later Loans for Credit Building

There are both pros and cons to using BNPL loans for credit building. On the positive side, these services often require only a soft credit check, which won't lower your score. They also provide a way to finance purchases without incurring high credit card interest rates. For consumers who may not qualify for traditional credit, BNPL services can be a useful tool.

However, the cons should not be overlooked. While some BNPL services report positive payment behavior, others do not. This means that while you can harm your credit score by missing payments, you may not necessarily build your credit by making payments on time. Furthermore, the ease and convenience of BNPL loans can lead to overspending, which could result in financial strain and missed payments.

Expert Advice on Using Buy Now, Pay Later Loans and Credit Building

Financial experts advise caution when using BNPL services. While they can be a handy tool, they should not be used as a primary means of building credit. Traditional credit-building methods, like making timely payments on credit cards or loans, are usually more effective.

If you choose to use a BNPL service, it's crucial to understand the terms and conditions. Make sure you can afford the payments and aim to pay off your balance as soon as possible to avoid any potential negative impacts on your credit score.


While the question, "Does Affirm build credit?" may have a nuanced answer, the key takeaway is that BNPL services like Affirm, Klarna, and Afterpay should be used responsibly. Understanding how these services affect your credit is essential to making informed financial decisions.

Remember, building credit is a long-term process that requires consistent and responsible financial behavior. While BNPL services can be a part of your financial toolset, they should not be your only strategy for credit building. Always consider your financial situation and seek professional advice if necessary before entering into any credit agreement.

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