Would I be eligible for BNPL with bad credit?
If you have had credit related issues in the past, then you can have difficulty accessing a Buy Now Pay Later product. Eligibility for Buy Now Pay Later is broadly dependent on your own credit score. If you’ve had difficulties in managing credit in the past, this can be reflected in your eligibility for BNPL with lenders showing reluctance to low or bad credit applicants. Eligibility criteria can vary from one lender to another.
However, most Buy Now Pay Later providers conduct a soft credit check prior as part of their eligibility assessments. Soft checks don’t necessarily take an in depth look at your credit file but are more so to confirm your address, date of birth and suchlike. So if you have an imperfect credit background you may still be eligible for a BNPL option based on a soft check, but this is dependent on the lender’s own criteria.
The 118 118 Money Simple Interest Rate Credit Card application on the other hand has a slightly different way of working. We offer a pre-application eligibility checker; this provides an indication if you’re likely to be accepted. So if you are aware that you may have poor credit, our eligibility check won’t impact your credit score. After the initial eligibility check, should you decide to apply for our Simple Interest Rate Credit Card, we will then conduct a full credit check which leaves a footprint on your credit file.
Can credit cards be an alternative to Buy Now Pay Later?
Dependent on the card features and how you use them, a credit card can be an alternative to Buy Now Pay Later options.
Credit cards can come with an interest free period on purchases which can, if used responsibly, help spread the cost of paying for items. The terms of some card lenders can allow you to spread the cost over many months without accruing an interest on the balance. You would still be expected to repay the minimum monthly payment though, just no interest on the outstanding balance. Although it’s always recommended that you make larger payments and clear the debt sooner if you can afford to. With Buy Now Pay Later schemes, typically repayments are spread over 3 months, this can of course vary by lender.
If your credit score and personal circumstances permit, and you find yourself eligible for a credit card, some of these cards come with additional features such as balance transfers too. A balance transfer is when you move the balance from one provider to another. However this can include a balance transfer fee, but with the 118 118 Money Simple Interest Rate Credit Card, there are no balance transfer fees.
Credit cards can also be used as a continuous line of credit provided you stay within the credit limit as agreed with your lender. This isn’t something your typical Buy Now Pay Later option offers.
Credit cards can also be used to improve your credit score, remember, the better your credit score is, the better access you’re likely to have to improved lines of credit in the future.
So in some ways a credit card can be considered an alternative, however your own research, circumstances and affordability should dictate which is a better fit.
Does a credit card offer more features than BNPL?
In some ways, yes. A credit card can offer more options when compared with a BNPL product. We mentioned some of the features you can access with some credit cards, some of these may not be applicable to Buy Now Pay Later schemes.
Importantly though, some forms of BNPL aren’t regulated to the same levels as credit cards are. This can be important when considering, for example, the added benefit of cover with section 75 of the Consumer Credit Act 1974. This gives you an extra layer of protection on purchases from £100 and up to £30,000. BNPL doesn’t necessarily come with this level of cover.
Credit card providers are regulated by the Financial Conduct Authority (FCA), not all Buy Now Pay Later providers are regulated at present. This is under review though with further rules expected to come into force soon.
On the one hand, if you have bad credit, some BNPL lenders may still offer you access to credit where some credit card providers may be apprehensive as your credit score indicates you could be a higher risk. On the other hand, lenders like 118 118 Money will still consider your application if you have bad credit, and remember, the 118 118 Money Simple Interest Rate Credit Card comes with zero fees.
Can Buy Now Pay Later impact my credit score?
This can depend on how responsibly you use the Buy Now Pay Later option. If you keep up with the agreed commitments and make the repayments on time, this can demonstrate that you’re responsible with credit. In turn this can have a positive impact on your credit profile.
Should you miss or make late repayments to the provider, this can be passed on to credit reference agencies resulting in this being recorded on your credit file. Ultimately this can result in your credit score being impacted negatively, which can impact the type and level of credit you have access to in the future too.
Credit cards aren’t too dissimilar in this respect. If you use the card responsibly, make at least the minimum monthly repayments and stay within your agreed credit limit, over time this can also positively impact your credit score. Missed or late payments will have a negative impact on your credit score too.
You can always use a credit reference agency such as Equifax, TransUnion or Experian to understand what your credit report looks like.
There are credit building credit cards available too, these can help improve your credit score if used responsibly.