Using Afterpay? Stop! How 'Buy Now Pay Later' Ruins Your Credit Score and Home Loan

Using Afterpay? Stop!

You want those new sneakers. You don't have the cash. You tap "Afterpay" and pay it off in 4 installments. Easy, right?

For millions of Australians, Buy Now Pay Later (BNPL) services like Afterpay, Zip, and Klarna are a daily habit. They feel harmless because they are marketed as "interest-free."

But when you walk into a bank to apply for a home loan, the credit manager sees those $50 payments differently. To them, you are a risky borrower.

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Does Afterpay Affect My Credit Score?

Historically, the answer was vague. But following the 2025 Credit Act reforms, the rules have tightened significantly.

• Mandatory Credit Checks: Under new laws, BNPL providers are now legally required to perform credit checks just like banks. This leaves a "Hard Inquiry" on your file, which can slightly lower your score each time you apply for a new service.
• Negative Reporting: If you miss a payment, it is reported to credit bureaus (Equifax/Illion/Experian). This leaves a default mark on your credit file for 5 years, instantly disqualifying you from prime mortgage rates.

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The Real Trap: Reducing Your Borrowing Power

Even if you have a perfect repayment history, having an active BNPL account kills your mortgage capacity.

Banks treat your BNPL limit (not just what you owe) as a continuing liability.

💸 The Calculation

If you have an Afterpay or Zip account with a $2,000 limit (even if the balance is $0), the bank assumes you could max it out instantly.

• Result: Because BNPL repayment terms are short (weeks, not years), the impact on your monthly serviceability is huge.
• The Hit: A simple $2,000 limit can reduce your maximum home loan amount by roughly $20,000 to $25,000. That is enough to lose your dream home at an auction.

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"Clean Your Statement" Before Applying

Mortgage brokers advise clients to "clean up" their financial footprint at least 3 months before applying for a loan.

1. Pay off all BNPL debts immediately.
2. Close the accounts completely. (Deleting the app is NOT enough; you must contact support to cancel the account limit).
3. Wait 3 months: Banks review 90 days of transaction history. If they see "Afterpay" withdrawals, they may classify you as a "living paycheck to paycheck" spender, which hurts your application score.

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Prioritize Your Mortgage Over Impulse Buys

BNPL is not "free money." It is a debt trap dressed up as a lifestyle app.

If you are planning to enter the property market soon, delete Afterpay today. Your future self (and your mortgage broker) will thank you for prioritising your financial freedom over a new pair of shoes.

General Advice Warning: The information provided in this article is general in nature and does not take into account your personal financial situation. Credit reporting standards and lending policies change frequently. Before applying for credit or a mortgage, you should check your own credit score and consult with a qualified mortgage broker.