Does Paypal Credit Affect My Credit Score?

Credit scores often carry significant weight, acting as a tangible representation of your financial health. Many of us have experienced concerns regarding the status of our credit scores at one point or another. With multiple factors contributing to your credit rating, it may feel overwhelming to keep track. One factor that often raises questions is the impact of certain financial platforms, such as PayPal, on your credit score.

If you're one of the few people who has read PayPal's terms of service, you may have noticed that credit reports and credit scores are mentioned. But does PayPal credit hurt your credit score?

All About Paypal Credit: What Is It? 

PayPal Credit works in the same way as a credit card in that it can be used to buy any consumer item that can be bought with PayPal. If the item is under £99, you have six months to pay it off without incurring interest. If you spend more than £99, the term is reduced to four months. After that, you will need to pay an APR of 19.9%.

There is no yearly charge, but you need to go through an application which will inevitably impact your credit score. PayPal does a complete hard check when it looks at your applications to assess whether or not you're a good candidate for credit, which leaves a mark on your credit report.

A traditional PayPal account acts similarly to any other money transfer service, as opposed to PayPal Credit, which allows you to stretch the cost of specific purchases by taking out credit. Payments and purchases are made using funds from your bank or credit card account.

Although PayPal Credit does not charge annual fees,  it does charge a £12 late payment cost, a £12 return payment fee, and a £5 fee for a printed copy of a previous statement. It offers an APR of 21.9% on average and a 4-month interest-free term on purchases of more than £99.

You will need to apply for a credit line with the company before you can use PayPal Credit. The following are some of PayPal's eligibility requirements:

  • You have to be over the age of 18 and be a resident of the United Kingdom.
  • You have to have a good enough credit score, though they do not specify how much. 
  • You can't have had any recent bankruptcies. 
  • You have to currently be employed and earn more than £7,500 a year.

If PayPal accepts your application, you'll start seeing PayPal Credit as a payment option for your online purchases.

Does Paypal Credit Affect Credit Scores?

Yes, applying for PayPal Credit will lower your credit score. This is because your credit score is affected every time you go through a hard credit check like it is when you apply for any type of credit like car finance for example. 

PayPal collaborates with a bank that will evaluate and audit your application. This thorough investigation will be kept on your credit report for two years and could result in a few points being deducted from your credit score. Since 2019, PayPal Credit has been reporting information to credit agencies. That means that if you miss a payment or are late in paying back what you owe, it may be noted on your credit report, with an immediate impact on your credit score. 

Even if you are approved for PayPal Credit, a full background check will be performed on you. This will make obtaining a mortgage, credit, or any type of loan more difficult in the future. Although one hard check does not have a substantial impact on your credit score unduly, applying for many loans in a short period will.

How Paypal Credit Affects Your Credit Score UK

When You Apply For Paypal Credit

Your credit score will be verified when you apply for PayPal Credit. If you are accepted, PayPal will conduct a thorough credit check, which will be recorded on your credit report. One hard check should have little effect on your credit score, but it will reduce it by a few points.

If You Ever Miss Any Payments 

If you do not repay what you owe, PayPal Credit will likely affect your credit score. PayPal will refer your case to a debt collection agency if you fail to pay your payment for an extended period. Just like other instant credit providers such as Klarna or ClearPay, the agency will report the debt to the credit agencies, and you will see a credit account on your credit report, which will affect your credit score. It's definitely in your best interest to always pay back in time! 

If You Increase Your Credit Limit

PayPal Credit may conduct a hard or soft credit check in particular instances. If you seek an increase in your credit limit, PayPal will conduct a soft check that will not appear on your credit report. After three months, PayPal may make you an offer to increase your credit limit.

Keep in mind that if you increase your credit limit without increasing your expenditure, your credit utilisation rate will decrease, which will boost your credit score.

If You Terminate Your Account

Closing your account may temporarily hurt your credit score because you will have less credit available in your accounts. If you shut your account without paying off your outstanding balance, your credit score will suffer even more.


If you wish to spread the cost of your purchases, PayPal Credit can be super helpful. Your credit score will be affected by using PayPal Credit, but if you keep everything within a healthy usage, it won't suffer. It could even help you boost your credit score! The key is to pay back in time, which is the same for all financial services  ✅

PayPal can be a simple way to send and receive money without having to use your actual credit card, and the usual platform does not influence your credit. When utilising any online purchasing tool, remember to use caution and make informed judgments, especially if it claims not to impact your credit in any manner.

Check out the Carmoola blog to discover more credit-related queries, we’re pros at all things credit, and we’re here to help (especially with car finance!)