‘Buy now, pay later’ schemes damaging millions of shoppers’ credit scores
Two million UK shoppers have had their credit scores damaged by ‘buy now, pay later’ (BNPL) schemes driving increasingly levels of consumer debt.
One in five shoppers are understood to have used a BNPL scheme to purchase goods in the UK over the past year, equating to roughly 10 million people, according to new research from Comparethemarket.com.
These increasingly popular schemes, which allow shoppers to take a product home and pay for it over a number of instalments, are reportedly leading many to receive black marks on their credit scores and take on “more debt than they perhaps realise”.
“Failure to pay outstanding bills can damage your credit score and result in a spiral of outstanding payments which could jeopardize important life milestones like buying a house,” Comparethemarket.com’s head of money John Crossley said.
“It is concerning that many of these schemes appear to be targeted at younger demographics.”
According to the research, 41 per cent of shoppers aren’t aware that BNPL schemes can affect their credit score, while 40 per cent of shoppers say these schemes encourage them to spend more than they usually would.
Young shoppers are reportedly worst hit, with 33 per cent of 25 to 34-year-olds stating they’ve used a BNPL scheme over the past year and 39 per cent of those stating this has damages their credit score.
Over the past five years consumer debt has risen by £60 billion.