How Buy Now Pay Later Affects Your Credit Score
To test how easy it is to stack Buy Now, Pay Later (BNPL) facilities, I recently signed up across three major platforms. Within three minutes, I was granted a combined total of R45 500 in credit limits, R12 500 from PayJustNow, R8 000 from Payflex, and R25 000 instantly from Happy Pay. While this was all done in the pursuit of journalism rather than with the intention to use it, with the announcement last week by the National Credit Regulator (NCR) that BNPL data will be included on credit bureaus, I wondered what these facilities would do to my credit score and affordability assessment.
To provide some context, although BNPL platforms have been providing data to South African Credit and Risk Reporting Association (SACRRA), this has yet to be integrated into the credit bureau systems. There were concerns that, unless correctly categorised, these facilities would inadvertently negatively impact consumers’ scores. Last week, the NCR confirmed that it will introduce two dedicated, unique account-type reporting codes (Codes A and Q). These codes allow BNPL data to feed into credit bureau reports without being misclassified as revolving credit facilities or traditional short-term loans, which would otherwise distort credit scores.
This, however, only comes into effect from 1 February 2027. The FinTech Association (Finasa) and BNPL operators have wanted these codes to live for some time. SACRRA already holds more than two million BNPL records, but testing and system alignments across bureaus, banks, and non-bank lenders delayed the rollout. According to Ayesha Hatea, TransUnion Africa’s director for research and consulting, this was not simply a data submission exercise; it requires a coordinated approach across providers, credit bureaus and users of credit information to ensure that BNPL data is reported consistently and interpreted appropriately.
Dean Hyde, chief operating officer at PayJustNow, believes that including this data for consumers with little to no formal credit history will help them build a credit score from scratch. It would also solve the problem of “stacking”, exactly the issue I tested, where I was able to open multiple facilities, well exceeding my affordability. Until these figures are reported on the bureaus, there is no real-time view of a consumer’s exposure across other BNPL providers. Reporting visibility directly tackles multi-app credit stacking.
According to research conducted by TransUnion, BNPL has become a significant financial tool in South Africa. Of those surveyed, 62% had used a BNPL product, and 37% used the product repeatedly over the past 12 months. Hatea believes that the product continues to meet a real consumer need for flexible short-term affordability. “Improved reporting should therefore be viewed as a positive development that supports responsible lending practices and provides greater transparency for both consumers and credit providers, while helping lenders better understand a consumer’s overall financial commitments”. So, what will this mean for the millions of BNPL consumers’ credit scores?
It is important to note that, unlike credit cards or other revolving credit facilities, where the entire facility limit is captured on the bureau, BNPL providers only report actual drawn balances. This is because these are payment plans, not credit facilities. So, while I may have been approved for R45 500, if I do not use it to make a purchase, then it will not reflect on my credit history. If I started to use the facilities, then that may have an impact but it would be more about my affordability than my credit score. If I used the facility, then it would have an impact on my affordability assessment should I wish to apply for formal credit. When applying for traditional loans, lenders will now see outstanding BNPL exposure on credit reports. This directly reduces calculated disposable income and can lead to declined credit applications.
According to Siva Dhever, head of credit analytics at Mettus Group, which includes credit bureau XDS, if you already have established credit, BNPL will have little impact on your score. “Scores are driven largely by payment behaviour on longer-term accounts such as home loans, vehicle finance and credit cards.” As long as accounts are paid on time, the impact is modest. However, if you miss a payment, that changes your score sharply. “Payment behaviour is one of the biggest score drivers, so a missed payment matters regardless of the amount owed,” says Dhever.
The upside is that for people with no credit history, using BNPL with regular payments will help build their credit score. This could be a good way for a young person to start building up a credit history without taking on all the other fees and interest associated with formal credit. “For someone with few or no traditional credit accounts, BNPL reported to the bureau creates a payment record where none existed. Paid on time, and kept to a small number of facilities, it moves you from having almost no visible credit history to having some. That is a real improvement,” says Dhever.
Responding to concerns that BNPL is adding to the over-indebtedness crisis in South Africa, Danielle Lawrence of Finasa argues that over-indebtedness in South Africa is driven by systemic economic pressures, not BNPL in isolation. She argues that, unlike traditional credit, BNPL poses almost no risk of default judgments or legal action; providers write off bad debts or resolve them via simple civil procedures rather than High Court enforcement. If a consumer misses a payment, their facility is instantly locked, preventing a debt spiral. “The facility is stopped with immediate effect. As soon as the process for default has been started, your opportunity or chance to get BNPL facility ever again with any of the BNPL providers is almost zero,” says Lawrence.
According to Hyde, PayJustNow has never brought legal action against any consumer and default rates remain below 3%, well below the provisions that the formal credit market has for defaults. “We cannot run at debtors’ cost ratios of more than 2% because our margins don’t allow for that. So, we wouldn’t be in business if we were lending money to people whom we never believed could repay. Having said that, I do think it’s very important that we report our data. I think it’s important for us, and it’s important for the credit industry to know what people are exposed to.”
While BNPL removes fees and interest associated with traditional credit, credit bureaus having a complete view of a consumer’s total commitments is still vital to protecting overall financial health.
BNPL can build a credit history while having little impact on an established one, but it can damage any file through a missed payment. Its bigger effect is on what lenders will approve, rather than the score itself, writes Maya Fisher-French.
As published on News24