Written by, Marija Petkova
Updated September, 21, 2022
Does PayPal affect credit score?
If you’re one of the few people that have read PayPal’s terms of service conditions, you may have noticed that they mention credit reports and credit scores.
That’s because PayPal has a service that can leave a print on your credit report and affect your credit score.
Read on to find out more about it.
PayPal Credit, formerly named Bill Me Later, is a reusable credit line attached to your regular PayPal account that you can use to extend the period of certain purchases.
Synchrony Bank currently manages the program.
If PayPal is not the right fit for you, you may consider a different service. Here’s our list of the best mobile-only banks.
Unlike PayPal Credit, which essentially allows you to spread the cost of some of your purchases by taking credit, a regular PayPal account works like any other money transfer service.
It draws funds from your bank or credit card account and uses them to make payments and purchases.
Looking to send money overseas? See our top picks on:
PayPal Credit doesn’t charge any annual fees, but it will charge you a late payment fee and a return payment fee of £12, as well as a fee of £5 for a printed copy of a previous statement.
It has a representative APR of 21.9% APR and offers 4-months of zero interest for single purchases that cost more than £99.
To start using PayPal Credit, you’ll have to apply for a credit line with the company. Some of its eligibility requirements include:
The company does not state a specific minimum PayPal credit score requirement.
If PayPal approves your application for the program, you will start seeing PayPal Credit as a payment option for your online purchases (but only if the merchant offers it).
If you shop at an online retailer that accepts PayPal and you buy things with PayPal Credit, you will have a minimum of six months (and up to 48 months) to complete the payments.
PayPal won’t charge you any interest in the first 4 months but only for purchases over £99.
As with a credit card, you can repay what you owe by setting up automatic payments (Direct Debit) or manually through your PayPal account.
PayPal Credit can appear on your credit report and affect your credit score, but only in certain circumstances.
If it ends up plummeting your credit score, you will have a harder time qualifying for credit elsewhere and finding a lender willing to offer you a loan. Even if you find a loan provider that works with people with bad credit scores, you will have to pay high-interest rates.
On the flip side, Paypal Credit can help your credit score if you make regular payments.
Here’s how PayPal Credit can affect your credit score and how that will be reflected on your credit report.
PayPal Credit will run a score check when you apply to get into the program. If you get accepted, PayPal will do a hard check, which will leave a mark on your credit report.
One hard check should not seriously damage your rating, but your credit score will drop by a couple of points, at least temporarily.
PayPal Credit can damage your credit score if you fail to pay back what you owe.
If you go too long without paying your debt, PayPal can refer your case to a debt collection agency. The agency will report the debt to the credit bureaus, and you’ll see a credit account on your credit score, which will decrease your credit score.
Wondering how debt collection agencies operate? See our comprehensive guides on BPO Collectors and Capquest.
PayPal Credit can run a hard or soft pull in different circumstances.
If you request an increase in credit limits, PayPal will conduct a soft check that won’t leave a footprint on your credit report. (Everyday Loans conducts soft checks only). You also might get an offer from PayPal to increase your credit line once 3 months have passed.
If you increase your credit limit without increasing your spending, you’ll also lower your credit utilisation rate, which will help your credit score.
Closing your account can temporarily hurt your credit score if it increases your credit utilisation rate because you’ll have less credit available in your accounts.
This would damage your credit score further if you close your account without paying off your outstanding balance.
PayPal Credit service can come in handy if you’re looking for a way to spread the cost of your purchases. Your credit score won’t suffer as a result of using PayPal’s Credit service, but it will dip when PayPal conducts a hard inquiry to determine whether you are a good fit for the credit line.
PayPal Credit might affect your mortgage application if you’ve recently set it up (since the hard inquiry that PayPal runs will leave a footprint on your credit report).
PayPal credit does not help you build credit in any significant way.
PayPal does not disclose the minimum credit score requirement for PayPal Credit but says that applicants need to have a good credit score.
Applying for PayPal Credit will affect your credit score because the company runs a hard inquiry on your credit file, which will temporarily knock off a few credit points.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.