New buy-now-pay-later laws could impact your credit score

Buy-now-pay-later (BNPL) services have recently become regulated under the National Consumer Credit Protection Act 2009. This change means BNPL providers must now hold an Australian credit licence and comply with responsible lending obligations, just like banks and other lenders.

The reform was introduced to address concerns about financial hardship and consumer harm in the BNPL sector. Under the new rules, BNPL providers are required to assess a consumer's ability to repay before approving credit. This includes making reasonable inquiries into a person’s income, expenses and existing debts to help prevent unaffordable lending.

The new rules also place limits on how BNPL fees are structured. Providers must clearly disclose all charges, including late fees and account-keeping fees, to help consumers make informed choices.

How BNPL can affect your credit score

Another major change is the way BNPL activity may now affect your credit report. Some BNPL providers will start reporting credit checks and repayment histories to credit reporting agencies. This means that missed or late BNPL payments could negatively impact your credit score, while consistent, on-time repayments might have a positive effect.

Over time, these new reporting rules could make BNPL accounts as visible to lenders as personal loans and credit cards. So, if you plan to apply for a home loan or any other type of credit in future, how you manage your BNPL accounts could be taken into consideration.

If you're using BNPL services, it’s crucial to:

• Make repayments on time to avoid negative marks on your credit report.
• Limit the number of BNPL accounts you open, as multiple applications can signal financial stress to lenders.
• Regularly check your credit report to ensure all information is accurate.