Does Using Clearpay Improve My Credit Score?

Sometimes it just happens - maybe you missed a loan or credit card payment or maybe defaulted on a finance agreement. So you now need to try to recover a good credit score for the future. According to a recent study, more than two million consumers who used "buy now, pay later" schemes have lowered their credit scores. But what does that mean for you and should you embrace or  stay away from these popular schemes? 

The temptation to "buy now, pay later" as a means of spreading your spendings is stronger than ever in light of the cost of living problem. However, it's important to know how Clearpay and other similar services, such as Paypal Credit or Klarna,  can impact your credit score and ability to obtain a larger loan or mortgage before choosing to "pay later" at checkout. 

Buy now, pay later (BNPL) programmes, which let customers put off paying for a purchase, are a truly popular choice at online checkouts throughout the UK. The companies that give customers the option to stretch payments when shopping at well-known retailers like Asos and Amazon, include Klarna, Laybuy, and Clearpay. 

Why should you adopt this method of shopping, and what is the reality of it? Let’s explore if using Clearpay has an effect on your credit score, how you can determine if you've been impacted, and how to make smart payments that won't wind up costing you extra. 😎

Does Clearpay Improve Credit Score? 

Let’s cut to the chase. Clearpay could possibly improve your credit score, but not in the most effective manner. One of the ways to increase your credit score fast in the UK is to borrow small amounts and pay them back on time. A regular commitment paid on time every month, such as a direct debit, will help improve your score. However, Clearpay does not currently share payment information with any of the UK's three major credit reference agencies. As a result, you will not see this information on your credit report, and it will have no effect on your credit score. They, like Klarna and other BNPL companies, conduct mild credit checks when you apply, but these have no effect on your credit score.

However, Clearpay's strategy may alter in the future. Clearpay recently stated that "appropriate and proportionate credit reporting can add value for customers" so stay tuned, this is expected to change soon. 

Hard credit checks are not performed by many BNPL providers. Instead, they do soft searches that only verify your identification and some rudimentary data. This may make it easier for you to obtain credit, but it also means that they frequently fail to report on-time payments to credit reporting companies. In other words, timely BNPL payments alone won't improve your credit score. 

Still, if you're looking to boost your credit score, Laybuy and PayPal Credit can be good options for you since they complete full credit checks. BNPL providers aren't a quick, immediate remedy, though. Even if you make on-time payments, you'll need to utilise BNPL for a few months before your score improves — and only if your supplier keeps track of on-time payments, of course.

Does Clearpay Affect Your Credit Score?

The government declared in June 2022 that the guidelines governing buy-now, pay-later loans are being tightened. Some Buy now, pay later credit providers, like Klarna and Laybuy, are stepping ahead of the game and have already begun sharing information with credit reference agencies, even though any changes may not take effect until 2024. What does this mean for you and your credit score? Let's find out.

There are three major credit reference agencies in the UK, however, Clearpay does not presently disclose information about your payments with any of them. Therefore, neither your credit score nor this information will be visible on your credit report. When you apply with them, they run a soft credit check similar to Klarna, but this doesn't affect your credit score.

When you apply for a mortgage, the lender may request information about your financial history from one or more credit reference bureaux in order to make a decision. A strong credit score boosts your chances of getting a mortgage approval, whereas a negative credit score can result in your application being denied or in higher mortgage rates. 

In the UK, Experian, Equifax, and TransUnion are the three primary credit reference organisations. And they each put up a report that provides an overview of your credit management skills. Your credit score, which is a single number, summarises all of this. Your credit score is crucial since it determines whether you can get a cell phone contract, how much interest you pay on your credit card, and if you can buy a house.

How To Boost Credit Score Fast UK

What can boost my credit score? What are the best tricks to increase your credit score and the most recommended things to do to enhance your credit score? Let’s find out. 

Register to Vote

Make sure you're on the electoral roll, as lenders will use it to verify your name, address, and past homes. Lenders must verify this information in order to validate your identification before giving credit. As a result, if you are not registered, your application may be delayed or denied.

Be Careful of Joint Accounts 

When you apply for joint credit with someone, such as an overdraft, joint loan, or mortgage, your credit history will be linked to theirs. If you want to boost your credit score, asking your partner to concentrate on improving their credit may be a smart idea, especially if they have a poor credit history.

Show That You Are Creditworthy

If you've never borrowed money before, it's difficult for a lender to judge how likely you are to make your payments. This has an effect on your credit score. Taking on a small amount of credit can help you borrow larger quantities in the future if you handle it appropriately. To build credit, you may want to try acquiring a pre-arranged overdraft or a credit card with a low limit.

Avoid Making Too Many Applications 

Too many applications may indicate to lenders that you are experiencing financial troubles. If all you want to do is compare rates, request that your lender conduct a "quotation search" rather than a "credit application search." This means it will not appear on your credit record.

Make Timely Payments

Lenders want to know that they can rely on you to make timely payments. If you skip a payment, your credit score will most likely drop. Lenders will be particularly concerned with your most recent payment history. If you've previously missed payments but have suddenly improved your reliability, your credit score may not suffer as much as you think. Furthermore, if you frequently spend near to or above your credit limit each month, it will appear that you struggle with money management. Try to keep within those parameters.