Affirm is one of several popular ‘Buy Now, Pay Later’ options, which have been exploding in popularity the past few years. This payment option is best suited for consumers that want to purchase something now, but spread out their payments over a short period of time, without taking on debt or loans. It is a financing option which is also known as a point of sale installment loan. This means that an Affirm will offer a customer small installment loan as a means to pay rather than other payment options, like using a credit card.
In essence, Affirm is a third party lender which is used by many merchants as a way to offer customers a flexible payment method. Merchants that take on an Affirm will pay a service charge and an Affirm loans the money to a customer. Bear in mind that if you use Affirm, you will need to pay monthly or biweekly so that the loan eventually gets paid off.
But, does Affirm affect your credit score?? The answers is that it depends, read below for when it likely will or likely will not.
Where are you able to use Affirm?
There are 1,300+ merchants that will accept Affirm as a payment method. Some of the big names include:
- Eddie Bauer
If you want to check if the store you’re shopping at accepts Affirm as a payment option then you can search for that store on Affirm’s website.
Will Affirm Usually Do A Credit Check?
People that use Affirm will usually undergo a credit check. Despite that these credit checks are usually soft credit checks. While, this will include the credit history of the person applying, it does not directly affect your current credit score. On top of that it will also not be present on your credit report.
If you use Affirm you may be able to get pre-qualified financing. There will also be no obligation to use the buy now and pay later plan, unless the you actually purchases something.
Will Affirm affect my credit score?
Affirm may seem like a deal too good to be true. Some may fear that it will negatively impact your credit score.
Since Affirm has two main products there are two answers:
1. For the Pay-in-4, interest free product:
- Likely do not report to credit agencies
2. For every two weeks or monthly payments loans:
- Likely do report to credit agencies
Why only ‘likely?’ Because, unfortunately, as we carefully dug through all of the fine print on Affirm’s website and in their loan agreements and documents, they never give a crystal clear, firm answer.
We think this is likely intentional. Reporting to credit agencies costs time, money, and resources for credit companies like Affirm.
So they likely prefer not to bother on their super simple, straightforward Pay-in-4 product, which we think they don’t make much money on and is likely essentially a loss leader.
However, they are sure to include language in their agreements like ‘may report,’ so that they can report bad actors who do not pay them back, or pay on time, even on a simple Pay-in-4.
For the actual loans, these are the pay every two weeks or make monthly payments, which do charge interest, we think they likely do normal credit reporting.
If you’re concerned about a negative impact to your credit:
- You could face a negative impact to your credit regardless of which product from Affirm you’re using, if you fail to make all of your payments on time. Affirm clearly gives themselves the right to report to credit bureaus like Experian, Transunion and Equifax.
If you’re concerned about a positive impact to your credit:
- If you use Affirm and make all payments on time, you likely will only see a positive impact to your credit score if you use the interest-bearing, monthly payments product
We found the fine print:
Here’s the answer, directly from Affirm’s website:
“Affirm currently reports some loans to Experian and may report to other credit bureaus in the future. Please note that this can include loans with delinquent payments, which may impact your credit. If your loan repayment activity is reported to a credit bureau, the entire loan history will be reported.“
“These things won’t affect your credit score:
- Creating an Affirm account
- Seeing if you prequalify
These things may affect your credit score:
- Your payment history with Affirm
- How much credit you’ve used
- How long you’ve had credit
- Making late payments“
How hard is it to be approved for a BNPL loan?
According to a recent study by the Consumer Financial Protection Bureau, roughly ~75% of BNPL loan applications were approved. Clearly, the stronger your credit history is, the more likely you are to be approved.
If you don’t want to go through the hassle of getting approved for a loan each time you need one, consider setting up an SBLOC instead.
Are there any alternatives to Affirm?
At the moment, Affirm is one of the most popular BNPL providers inside the United States. However, there are actually a ton of alternative service options that you may be able to make use of.
We have found some of the best alternative options out there and listed them below for you to peruse:
Make sure to do your own research before you go for a new BNPL.
Bottom line: does Affirm affect your credit score?
Using Affirm can influence your credit score and it can negatively impact it.
During the application, Affirm will only do a soft credit pull, which will not affect your credit score.
However, during the payback period, Affirm may report to credit bureaus. Reporting is most likely if you don’t make on time, in full payments using any product, or regardless of good or bad repayments using their interest-bearing loan product.
At Personal Finance Guru, we want to help you maximize your lifestyle through personal finance. You can trust the integrity of our independent financial advice. Our opinions our own and have not been provided, review, approved, or endorsed by any advertiser or financial product provider. To support and grow the site, however, we may receive compensation from the issuers of some products.
Cody is the founder and owner of Personal Finance Guru. His day job is as a management consultant at one of the Top 3 firms (think Mckinsey, Bain), where he advises Fortune 500 C-suite clients on their most important and pressing business problems. He completed his business education at Harvard Business School.
After seeing the lack of personal finance education for regular people, Cody started the website with the mission to provide everyone access to information that will help them achieve their financial goals.
Cody approaches personal finance from a maximalist perspective, shunning typical advice around simply not buying a cup of coffee instead of more effective methods like investing in yourself to quickly grow your income.
He believes in saving money and investing for the future, but he also knows that you need to enjoy life today. That’s why Cody approaches money with a sense of humor and a positive attitude. He knows that if you’re not having fun while you’re growing your wealth, then what’s the point?
Cody approaches life with the same gusto that he brings to personal finance. He loves to travel and experience new cultures, and he is an avid reader and learner. He also enjoys playing sports (especially tennis) and spending time with his family and friends.