3 ways to buy now, pay later to boost your credit score


In recent years, due to advancements in fintech, the credit ecosystem has undergone a massive transition. Today, there are many types of credit solutions available to you in the market. For example, you can now check the CIBIL score by PAN card completely online, while accessing your credit report in minutes. Another innovative solution in this space is Buy Now, Pay Later (BNPL), a progressive solution that makes access to credit much simpler and easier. This is primarily because BNPL solutions lack the strict eligibility criteria typically associated with credit instruments such as credit cards or loans. As a result, they are the preferred choice for the person new to credit.

In addition to access to credit, the BNPL allows customers to finalize their purchases without encumbering their savings. Choosing to pay in installments not only has short-term affordability benefits, but can also have long-term benefits for your credit score. Indeed, timely credit payments are known to boost your score. Additionally, BNPL is recognized as consumer credit and major credit bureaus like CIBIL include deferred repayment loans in their consumer credit reports. All of this indicates that BNPL provisions can be a smart way for you to not only establish your credit score, but also maintain it.

To find out how to get the most out of this financing solution and add value to your credit profile, read on.

Allows easy access to credit

If you are one of those people who have little or no prior experience with formal credit, you may not receive a CIBIL score. You can check this by doing a free CIBIL score check through digital service providers like Bajaj Finserv and noting whether you have “NA” or “NH” score. With such a rating, it will be difficult to get loans or even get approved for a credit card. In cases where you get approved, you may not get a high limit or be offered an unfavorable interest rate. It’s not ideal and BNPL is a smarter alternative for accessing credit and building your score.

You will be able to benefit from BNPL offers at retailers, even without prior credit experience. By leveraging digital KYC, you can get quick approval and make purchases instantly, without dipping into your savings. In addition, BNPL’s target market is much broader, as it is accessible even to non-employees who are new to credit. Additionally, defaulting on credit card EMIs can cost you up to 48% interest, while it typically goes up to 24% with BNPL. This makes BNPL a better option for smaller purchases and one you can use to build your score regularly.

Make sure you make all payments in full and on time

BNPL payments are like all other EMI payments and the duration usually varies up to 90 days. So, when using the option at a retailer, make sure the EMI amount is something you can easily manage. One way to do this is to choose a longer duration. You may be allowed to choose between a short or a long tenor and to maximize affordability choose the latter. This way, you can make consistent payments throughout and steadily increase your credit score.

Note that your CIBIL score is based on 4 main factors, in which your payment history has a 30% weighting on the score. So prioritize affordability when it comes to payments because defaults due to high amount of EMI are not worth the risk. In fact, failure to pay will have a negative effect on your score.

Diversifies your credit mix

A healthy credit mix always adds value to your credit profile. Having several forms of active credit and managing them effectively increases your CIBIL score as it accounts for 25% of the score. As such, using BNPL can be a smart option as these deals are short term and small in size. By including it in the mix and paying it off on time, you can easily boost your score.

These are the many ways in which BNPL serves as a viable tool to build your credit score, especially as an individual with a low credit score. Along with its affordable and transparent pricing model, the instant digital sign-up provisions make it a unique and easy-to-use model. Even with a low credit score or minimal credit history, you can use BNPL to make purchases, and this benefit has made it extremely popular with Gen Z and Millennials. Although you can use a card loan or take out a personal loan for major purchases, opting for BNPL is a prudent choice for small purchases.

Over time, as you make payments consistently, you can run a free CIBIL score check on Bajaj Finserv and notice changes in your score. Bajaj Finserv also offers a personalized CIBIL health report, which contains crucial information about your credit profile and status. Access it to see the impact of your credit behavior and track the impact of your finances on your score.

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