Does Affirm Affect Your Credit Score?

Affirm is a well-known and used BNPL service that lets you pay for the purchase in several installments over time. It helps to make large purchases more affordable by dividing the payments. However, many people are also concerned about the effects of utilizing Affirm on their credit status. As you peruse this article, you learn more about the specifics of Affirm and how it impacts your credit.

How Affirm Works?

Affirm allows you to pay for purchases from $50 to $17,500 in installments. At the time of checkout, you decide on the payment plan that you prefer. Options generally vary between 3 and 48 months. It is a fact that long terms are associated with higher interest rates than short terms. After approval, you will make fixed monthly installments to Affirm until the agreed amount is fully paid. They provide payment information to Experian, TransUnion, and Equifax.

This leads to the next question; Does Affirm conduct credit checks?

In most cases yes. When you apply, Affirm does a soft credit check to see your credit report and decide on your approval. Soft inquiries on their own do not have any effect on credit scores. However, if it is approved it becomes a hard inquiry. A multiple hard inquiry over a relatively short period can slightly lower your credit score. However, FICO models group all inquiries made within 45 days as one inquiry. Affirm also counts as only a single hard check if it appears in the shopping carts. Thus you should not incur many losses from buying from several merchants.

Is it Possible to Build Credit with Affirm?

Affirm has the prospect of enhancing credit health. These reflect on the positive payment history when you make consistent on-time payments each month as they get reported to the bureaus. Timely payments contribute to a relatively large percentage of FICO credit scoring systems. Here, BNPL products such as Affirm prove you can handle new lines in revolving credit responsibly. In the long run, this negates earlier delinquencies and boosts your score up to a certain level.

Is Affirm Credit Score Harmful If You Default?

Failure to meet payment obligations does not show the creditworthiness responsibility that the bureaus like to see. If you are unable to make payments, Affirm can even report those clear instances of delinquency to the credit bureaus as those that are up to 120 days past due. Failure to be paid for 30 days results in additional missed payments sent at the 60 and 90-day marks. After 120 days of overdue payments, they may charge off or send the accounts to collections. Charge-offs and collections significantly affect credit. If at all possible, do not miss any payment due dates.

Affirm Late Fee Policy

If you are unable to make your payment on time, please reach out to Affirm directly. Their late fee policy offers some leniency but has rates as high as $30 for each delayed payment based on the purchase amount. To avoid this, automated emails and notifications are sent to the users when due dates are near. Make sure that you meet the requirements for the card, and make sure that you can afford to pay the balance at least once a month.

Other options to reduce the credit effect

For those who are concerned with credit history, there is Debit Pay which is qualified. It allows Affirm to withdraw the full amount directly from your bank account every two weeks. Since credit check or reporting is not involved no score is affected. PayPal Pay in 4 is similar to this as well. You must repay in full with their structured installments using a PayPal cash balance or bank account over 6 weeks. A pay-later solution, not revolving credit, therefore, there is no credit check or reporting involved.

The advantages of using Affirm and the disadvantages of having a credit score

Here are a few key positives and negatives of using Affirm on your credit file.

Pros:

Establish credit history paying the agreed amount within the required period
.Chance to restore bad credit history
Low hard inquiries are unlikely to lower scores significantly

Cons:

Delinquencies, which reflect the missed payments, decrease the scores if reported.
Results applied can therefore be submitted in hard pull which declines the score for a few points.
Higher interest costs compared to other options

Should You Use Affirm?

In general, Affirm probably will not significantly help or harm your credit history on its own. Used appropriately by charge on the due monthly payment it enables those with no credit to prove the repayment period. That creates a positive history that leads to a score increase by a candidate. But be careful though, missing installments can damage the accounts. Consider the benefits against the possible disadvantages or new risks regarding your current credit status. The rest that may have a good payment history may prefer other forms of financing. Make choices based on your options and use Affirm carefully taking into account the effects.

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Does Affirm Affect Your Credit Score?