Debtors with a “perfect credit score” and a “few” purchase now, pay later transactions have been declined mortgages, brokers have informed the Cash weblog in an unique survey.
A number of brokers informed us a shopper’s common use of BNPL companies was an element of their rejection by a excessive avenue lender.
Brokers have urged lenders to vary the best way they choose potential debtors with BNPL funds on their credit score file.
In response to our findings, two of the largest BNPL firms hit again, saying they offered revolutionary companies and the remainder of the monetary trade ought to catch up.
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What’s BNPL – and the way do lenders get your utilization knowledge?
These schemes permit clients to unfold out funds on purchases interest-free and are utilized by nearly 11 million Britons, in response to the Monetary Conduct Authority.
Klarna, PayPal’s Pay in 3 and Clearpay are three of the most well-liked within the UK. Right here’s how they work together with credit score companies…
Main UK lenders use knowledge from a minimum of one among these credit score reference companies to evaluate mortgage candidates, together with financial institution statements and different checks.
Not one of the BNPL firms carry out onerous credit score checks earlier than permitting a buyer to make use of their companies – in order that half has no impact in your credit score rating.
Nevertheless, fee knowledge is shared, which may have an effect. Missed or late funds can have a unfavorable impact, however BNPL firms say making funds on time can have a constructive influence.
However some brokers have seen BNPL funds, whether or not accomplished or not, having the alternative impact on mortgage purposes.
‘Credit files 150 pages long’
In a survey of 21 brokers commissioned with the Affiliation of Mortgage Intermediaries (AMI), a commerce physique, 67% of brokers stated BNPL had both performed a component in or induced a person’s rejection by a excessive avenue lender.
Of these, 40% stated their shopper had “regularly” used BNPL, and 21% stated they’d used it “habitually”.
27% stated BNPL use had induced a shopper to be positioned on a better rate of interest.
In a single case, a dealer informed us a borrower had been declined by 4 excessive avenue lenders for utilizing such companies a “few times” – regardless of having a “perfect credit score”.
In one other, a shopper was rejected after a lender recognized 33 deferred Klarna funds over a 12-month interval.
Some brokers additionally informed us that Klarna funds had left their shopper with credit score information greater than 150 pages lengthy.
Jack Tutton, a director at mortgage dealer SJ Mortgages, informed Cash he had a shopper with 17 lively Klarna accounts and greater than 100 accomplished funds who was unable to get a mortgage with a excessive avenue lender, and was positioned on a better fee because of this.
His shopper had constructed up the Klarna purchases over 18 months, with the quantity borrowed as little as £11, regardless that she had the funds to pay for the merchandise in full.
“All the time people are borrowing money, lenders need to take that into account. I would be very surprised if they ignore those payments because from their perspective they are borrowing money to buy goods as low as like £11,” he stated.
“For instance, when you’re a first-time purchaser, and also you’re residing at residence, then you definitely’re spreading funds of £14 over three months. From a lender’s perspective, that’s going to be a priority.
“My client had one of the longest credit reports I’ve ever seen. And when I spoke to her about it, it was just simply because it was easy to use Klarna.”
He defined that some excessive avenue lenders carried out a smooth credit score verify on debtors, and if the quantity returned wasn’t excessive sufficient, they didn’t get any additional within the course of.
However some might ask to see financial institution statements, so even when a shopper’s BNPL behavior hasn’t had a unfavorable influence on their rating, seeing a number of transactions from their account can elevate questions.
“That’s going to open up a can of worms because if they can’t see it on your credit check, and then there are a multitude of transactions on your bank statement, that will need some answering,” he stated.
However utilizing BNPL doesn’t imply you’ll positively be rejected. For those who use it often and sensibly, making funds on time, it shouldn’t have an impact.
One dealer reported a blended image, with one shopper rejected however a number of others utilizing BNPL schemes efficiently getting a mortgage from a excessive avenue lender.
In complete, 53% of the brokers we requested stated lenders have to make it simpler for folks utilizing BNPL to get a mortgage.
David Hollingworth, affiliate director at L&C, one of many nation’s largest mortgage brokers, stated BNPL use shouldn’t be the only real cause a mortgage utility is declined, but it surely might feed into the quantity of borrowing accessible because the lender takes account of the extent of dedication.
“Where it’s a very short-term agreement there may be little to no impact but borrowers who are using BNPL very frequently may find lenders taking that into account as a commitment and reducing the level of available borrowing.”
Stephanie Charman, chief government of the AMI, stated: “With shopper use of BNPL rising, it is going to more and more come on to corporations’ radar, however the good thing about utilizing a mortgage adviser implies that customers are in a position to talk about their present monetary place early on within the course of.
“The survey data shows that while some applications are being initially declined, advisers are able to find a solution, giving that only 27% needed to place the customer on a higher rate than initially first researched.”
What do the BNPL firms say?
Klarna argues that having a number of accomplished purchases exhibits good cash administration, making an individual extra enticing to lenders.
“If a mortgage broker tells you that using Klarna means you won’t get a mortgage, find a different broker. Lenders have made clear they see healthy, short-term, interest-free BNPL use as a normal part of modern money management – and when used responsibly, it can help, not hinder, your chances of getting a mortgage,” a spokesperson informed Cash.
Thus far, Clearpay has by no means acquired any queries from clients in relation to it affecting their mortgage prospects.
It informed Cash that BNPL has turn into an “everyday payment” for thousands and thousands of individuals searching for “innovative financial products”.
It stated 95% of transactions are paid on time, with clients utilizing its service to handle their spending responsibly.
“It is concerning that some sectors within the financial services industry may not understand how BNPL works and how consumers are using it to help organise daily expenditure. Clearpay expects lenders to assess BNPL usage in a proportionate manner that is reflective of the risk of the product and the overall financial profile of the customer,” it stated.
“We are working hard with credit reference agencies, and the wider industry, to ensure that BNPL data is used fairly in credit decisioning and we support the ongoing work in the sector to drive improvements for customers and firms.”
BNPL is presently unregulated within the UK, however this is because of change in 2026, with Clearpay hoping it is going to set clear compliance requirements for all suppliers and create a constant working surroundings.
PayPal was contacted for touch upon a number of events however didn’t reply.
What do main banks and lenders say?
Lenders should not have a unified method to BNPL on the subject of deciding whether or not to approve a mortgage – so an individual who’s rejected by one might sail by the method with one other.
Cash understands that a minimum of one main excessive avenue lender doesn’t take into account using BNPL as a part of their approval course of in any respect, viewing the agreements as such short-term loans.
Nationwide captures agreements which have greater than six months on them as a part of the applying course of, but it surely stated it noticed “very little of this”.
Yorkshire Constructing Society stated occasional BNPL use wasn’t a priority in isolation, but it surely “may contribute to an overall view if other indicators of financial stress are evident”.
“No decision is made in isolation, and consideration is given to credit card usage and loans – including BNPL – to understand spending habits and repayment history,” it stated.
Santander treats pending BNPL funds like an excellent debt, so whereas it doesn’t have an effect on clients’ means to get accepted, it may possibly restrict the quantity it is ready to lend to them.
Leeds Constructing Society doesn’t deal with BNPL any otherwise to different monetary commitments. It’s constructed into its affordability mannequin to ensure a buyer’s mortgage is inexpensive when the BNPL steadiness is due.
NatWest doesn’t have any particular steering to BNPL agreements, however does take into account them as dedicated expenditure to ensure a buyer’s mortgage is inexpensive.
Skipton Constructing Society pressured “responsible management” of all types of credit score, together with BNPL, was necessary when making use of for a mortgage.
Coventry Constructing Society stated BNPL shouldn’t do any hurt if clients sustain with repayments: “So picking up one or two things on BNPL might not make a great deal of difference, but if it becomes a little more of a habit and those repayments rack up, it could affect your chances of getting a big enough mortgage to buy the property you want.”
It warned, nonetheless, that BNPL may very well be a difficulty notably for first-time consumers who had been already stretched with mortgage borrowing.
HSBC lends based mostly on the affordability and circumstances of every particular person, however encourages candidates to grasp their monetary commitments earlier than making use of.
Already used BNPL? Right here’s what you are able to do to spice up your probabilities of getting your mortgage permitted
As we’ve defined, utilizing BNPL isn’t a surefire strategy to get rejected, however when you’re involved about your mortgage approval possibilities, there are some methods to spice up them.
Hollingworth stated it is best to verify your credit score report with the large reference companies and flag any unfavorable information along with your adviser: “If there have been missed payments try to get those up to date and put things back on track as soon as possible. The longer that the track record is clear before making the mortgage application the better.”
Mortgage lenders can view well-conducted credit score preparations positively because it exhibits that credit score may be managed, but it surely is sensible to assessment your month-to-month budgeting.
“If there are outgoings that can be reduced or new credit arrangements that aren’t necessary, then it could help to meet the mortgage lender’s affordability assessment. Again, your mortgage adviser will be able to help you understand what you may be able to borrow,” he added.
Enhancing your credit score rating may enhance your probabilities of being permitted and there are some easy methods to do that….
