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Does PayPal Credit Affect Credit Score?

Does PayPal Credit Affect Credit Score?

PayPal Credit, which used to be referred to as Bill Me Later, is a convenient solution for those who wish to purchase but do not have the full asking price upfront. Splitting the price into installments is easier on the pocket and guarantees you’ll get what you need. However, you may wonder how using PayPal Credit will affect your credit scores. 

Borrowing, agreeing to pay in installments, or settling it in the future solves a present need in a challenging economic situation. However, such an arrangement needs strict discipline and prompt honoring, lest you suffer the consequences.

Typically, your credit score is the first thing to be affected. PayPal Credit operates slightly differently from other solutions, but the effects are more or less similar. Let us examine those differences and determine if they affect your credit report.

So, Does PayPal Credit Affect Your Credit Score?

Yes, PayPal Credit affects your credit score. Before we explain how it affects your credit score, let us explain what PayPal Credit is.

What Is PayPal Credit?

Credit CardPayPal Credit is an open line of credit or reusable credit line you can access for purchases in all stores and services that accept PayPal payment solutions. How does PayPal Credit work? It is a credit card account built into your PayPal account, which allows you to pay for goods immediately or to pay at a later date.

Synchrony Bank facilitates the line of credit. As a PayPal user who regularly receives and makes payments, PayPal offers this facility after a credit check. Therefore, your credit score determines your eligibility, and your repayments, in turn, affect the credit report to a credit bureau. 

PayPal Credit does not charge interest on repayments made within six months of the purchase date for goods and services worth $99.00 or more. This way, you have the incentive to make timely payments, thus continuing to enjoy the service. Depending on your individual account, you’ll have a credit limit, but $20,000 is a common figure.

How Will PayPal Credit Affect Your Credit Score?

When you apply for PayPal Credit, Synchrony Bank has to perform a hard credit check. This check affects your credit score. After all, it is a line of credit application, which demands a hard credit check. This credit check is a major entry into your credit report and appears there for at least two years. 

Depending on the report, you may lose a few points on your score. PayPal Credit is obligated to report your score to major credit bureaus, which will affect your credit access overall. Therefore, missing a payment or making late payments will be a negative entry into your report. 

Additionally, using the service often means a higher risk of a negative entry in your report. Whenever you miss or make a late payment, PayPal has to include the details in your report to the credit bureaus. 

It is advisable to apply for PayPal Credit and endure that one initial setback, but ensure you only use it when you can settle the repayments on time. This way, you’ll recover the score quickly and build it up with each positive entry.

Note that closing your PayPal Credit account could also affect your credit score. Closing the account is a negative entry into your report since you’re lowering your access to credit. Additionally, closing the account before settling the outstanding balance is devastating to your score.

Therefore, you need to be keen on when to close your PayPal Credit account should you wish to do so.

Should You Apply for PayPal Credit?

You’re probably wondering whether PayPal Credit is worth the hassle. The answer is that it depends. You should proceed if you’re willing to take the initial credit score hit and build it back up. However, you need to be disciplined with the repayment to avoid the interest rate charge and to avoid a negative report entry. 

CreditOn the other hand, you have to ask yourself whether you need that line of credit. Since its inception, customers have increased their spending by about 30%. The availability of credit, convenience, and other seemingly favorable conditions continue to drive consumerism and overspending, which is not good for you. The long-term effects on your financial situation or personal finance are dire if unchecked.

Extending the repayment period does not mean you will be ready to pay later. In such situations, people tend to ease off their commitment, creating more problems later. 

You’re better off not using such extensions and buying only what you can afford to pay for now. If you can afford to pay later, wait until that time arrives to commit to a purchase.

It is worth noting that the initial hard credit check may not be successful, and you will not qualify for the facility. Since it is a hard check, your score will take a bigger hit for both the check and the disqualification. Therefore, only apply if you are sure of a positive result.

Note that delaying repayments until the six months are over means you will be subjected to hefty penalties. Looking back, that purchase may not be worth it, and you could have waited until you were ready. Therefore, avoid using this facility if you can help it. 

What’s the Way Forward?

When used correctly, PayPal Credit is a convenient service that can help you manage your expenses and improve your credit score. However, most people lack the discipline and focus to use it to their benefit. Like any other line of credit, you don’t want to delay or miss payments as the ramifications are dire. 

PayPal is a pretty convenient, secure, and diverse money transfer solution that is globally recognized and accepted. If possible, avoid jeopardizing its application and practice better financial management.

Considering that PayPal Credit applies to purchases, you should avoid those that seem crucial yet are not in the grand scheme.


We hope this article has answered your question, “Does paypal credit affect credit score?” PayPal Credit affects your credit score, so you should only consider using this credit line if necessary. The application and subsequent usage expose you to a negative entry into your credit report, which you should avoid as much as possible.