Have you ever been shopping and there’s an item for sale for one more day and you don’t have the cash to make the purchase?
We’ve all have been there at one point or another. What can you do to get the sale price without overdrafting your bank account?
Get a buy now pay later credit card. It’s an easy way to finance a purchase so you can have your cake and eat it, too.
Keep reading to find out how buy now pay later financing works and whether or not your credit score is affected.
What is Buy Now Pay Later?
Buy now pay later is a simple way to finance a purchase. Have you ever shopped at a retailer and they offered the option to place your order now and then pay in monthly installments?
That’s how buy now pay later works. It can be in the form of a small loan or through a retailer’s branded credit card.
As an added incentive, buy now pay later credit card may not carry interest for the first six to twelve months. You can bring home that TV interest-free as long as you pay for the TV in full before interest kicks in.
Electronic stores are likely to offer buy now pay later because TVs, laptops, and appliances are expensive. Many people will need to rely on some kind of financing to pay for a large-ticket item.
Does a Pay Now Pay Later Credit Card Impact Your Credit Score?
This is a question that you need to ask yourself before you sign up for any buy now pay later credit card. The reason why is because it depends on whether or not your credit score is impacted by a couple of factors.
The first factor is the retailer. They can see if you qualify for a financing deal by doing a hard credit check or a soft credit check.
There’s a key difference between the two. A hard credit check will impact your credit score, while a soft credit check doesn’t. A hard credit check can cause your credit score to drop a few points and it will stay on your credit report for two years.
Most credit reporting agencies will find 1-2 credit pulls on your report to be acceptable, but if you have more than that, you can see a drop that’s more than just a few points.
How do you know if the retailer is going to do a hard or soft credit check? One way to find out is to ask. Another way to find out is to see if they ask for your social security number or the last four numbers of it. That usually is an indication of a hard credit pull.
The second factor is you. In other words, will you pay your bills on time? Late or missed payments will have a significant impact on your credit score. So, while those buy now pay later options look great, you want to make sure that you’re able to make the monthly payments.
Be Responsible with Credit
While there are plenty of examples of retailers who offer low to no interest buy now pay later options, there are a few out there who are criticized for charging very high-interest rates.
You want to be very clear as to what you’re getting yourself into when you opt for buy now pay later options. It’s not a bad thing, you just want to make sure that you are able to secure a low-interest rate, a low monthly payment, and you want to know whether or not there’s a hard credit pull and if the loan will appear on your credit report.
Tips to Keep Your Credit Score High
So much in life depends on your credit score, which makes it incredibly important to maintain a high credit score.
The higher your credit score, the more likely you are to get a great apartment, get a good job, buy a home or a car.
Not only that, but a high credit score means that you can borrow more money for less. You won’t have to pay as much interest as someone with a lower credit score.
How can you leverage programs like buy now pay later and keep your credit score high?
The first thing you can do is to minimize the number of cards you apply for. You only want to apply for credit when it’s very useful.
One other thing you can do is to make sure you pay down your debt as fast as possible. Up to a third of your credit score is determined by your credit utilization ratio. That’s the amount of credit you’re using divided by the amount of credit available to you.
If you have a high credit utilization rate, you will see your credit score drop. Most credit agencies consider a credit utilization rate of 30% or lower to be acceptable.
You might find it useful to set goals each month and pay a certain amount of your funds to pay down your debt.
Buy Now Pay Later Credit Card for Flexible Payments
It’s never fun to go shopping and see the perfect item, only to find that you don’t have the cash to cover it. Online and brick and mortar retailers recognize this and offer the opportunity to pay with a buy now pay later credit card.
They’re great to have so you can bring home those pricey items without breaking your bank account.
As long as you use credit responsibly, you should have a minimal impact on your credit report from using buy now pay later.
Would you like more great tips and financial advice? Check out this article that will inspire you to financial success.