Does Paypal Credit Affect Your Credit Score?

Sometimes, bills can pile up on top of you. There seems to be always something that needs paying off, or there’s a birthday or holiday where you have to buy things for other people. It’s tough. 

Perhaps you’ve had a big change in your life, such as buying your first home, where there is so much that you have to pay for, including bills, realtors and furnishing the place.

Whilst you can afford it, you may feel more comfortable spreading the cost across a few weeks or months, to make it more affordable. That’s where credit comes in handy.

Does paypal credit affect your credit score?

Nowadays, you can actually get credit on your Paypal account, so you can pay for purchases there and then, and worry about actually paying for it later.

This is great if you have a few things needing paying for one month, as you can spread the cost across two, three or four months, to make budgeting much easier for you.

But, does Paypal Credit affect your credit score? This guide will tell you everything you need to know. 

What is paypal credit?

Paypal Credit is a relatively new service offered by the company Paypal. It works in a similar way to a normal credit card, however it is for online purchases, unless you apply for a Paypal Credit Card, and you can use it anywhere that accepts Paypal.

Luckily, Paypal is such an established and secure monetary platform, that so many retailers offer Paypal as a preferred payment method. 

Paypal Credit works by allowing you to use Paypal to cover the cost of an item, of which you will pay back later, much like a normal credit card. On Paypal Credit, if the item is under $99, then you can pay it back over 6 months interest free.

If the item is over $99, then you have to pay it back over 4 months. After this time has passed, you will have interest on the item to pay, with an APR of at least 19.9%. 

As long as you make your payments on time, you do not have to worry about accruing interest on your purchases. However, if you do not make payments on time, then you will incur charges.

Late payment fees can be upwards of $40, but that can be reduced if you make the minimum payment as soon as possible. 

Many people use Paypal because of the Purchase Protection they provide. If an item does not arrive or does not match the description, your purchase is covered by Paypal and protected, and you will get a refund.

The other great thing about Paypal Credit is that it is so convenient. It is also very fast, and you can start using the credit as soon as you are approved, which typically happens within a few seconds.

So, what are the downsides, does Paypal Credit affect your credit score?

Does paypal credit affect your credit score?

Yes, when you apply for Paypal Credit, it will affect your credit score. This is because Paypal has to do a ‘hard credit check’ to see if you are eligible, and to gauge your credit limit. Paypal may offer some users credit limits of $250, whereas others may receive a limit of $1000. 

Whenever you undergo a hard credit check, your credit score could be lowered by a few points. Paypal is partnered with a bank, which is called Synchrony Bank. This bank will be the one reviewing your credit application, and will complete a quick audit to see if you are eligible. 

This hard check can appear on your credit report for about 2 years, and can lower your score slightly. In addition, since 2019, Paypal Credit does now report information about your account to credit bureaus.

What this means is that if you do not pay, miss a payment or if you have a late payment, it will be recorded and published on your credit report, which will in turn lower your credit score. 

However, if you keep on top of your Paypal Credit, never miss a payment, and use the Paypal Credit system wisely and responsibly, there is no reason why your credit score will decrease.

Yes, your score can be lowered by a hard check, but this only makes a difference to your credit score if you undergo lots of hard checks and apply for multiple loans in a small period of time.

Can paypal credit improve your credit score?

As mentioned above, Paypal Credit can decrease your credit score slightly due to the hard check. However, if you make your payments in 4 or 6 months, then it is interest free, and has no impact on your credit score. 

However, as Paypal now reports to the major credit bureaus, making timely payments and paying off your loan can help improve your credit score, as it shows you are using the system responsibly and in a timely manner.

What credit score do you need for paypal credit?

In order to be approved for Paypal Credit, you will need a minimum credit score of about 700. If your application for Paypal Credit is denied, then it is probably because your score is low or below 700. 

To be successful, you will also need to provide your date of birth, the last four digits of your social security number, your income after taxes, and you will have to agree to the Terms and Conditions. 

Even after you are approved, how much credit you are awarded depends on your individual credit and your personal circumstances. The credit limit you are given can be anywhere between $250 to $1000, or even up to $20,000.

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