Does PayBright affect your credit score?

The rise of online shopping, magnified by the Covid-19 pandemic, made the buy now, pay later (BNPL) payment method increasingly popular in Canada. Companies like PayBright, a Canadian fintech, have addressed this market gap by offering customers short-term installment loans online and offline at checkout.

The Globe and Mail reported that PayBright’s funded purchases more than doubled in 2020, with no signs of slowing down. But does PayBright affect your credit score? Let’s take a look.

Does PayBright affect my credit score?

Yes, PayBright will affect your credit score if you use the “Pay Monthly” option. The Pay Monthly option allows you to make automatic monthly installment payments over a period of six to sixty months.

PayBright will check your credit first to make sure you qualify for the loan. This will result in a hard credit inquiry that will show on your credit report and will slightly negatively impact your credit score. As with any installment loan, your repayment activity will be reported to both credit bureaus in Canada – TransUnion and Equifax. Making your payments on time every month could help you improve your credit score because you’re demonstrating that you’re responsible with credit. However, if you miss a payment, this could negatively impact your credit score.

On the other hand, if you choose the “Pay in 4” payment option, your credit score won’t be affected. PayBright will check your credit by performing a soft credit inquiry, which doesn’t impact your credit score, to verify your information. The Pay in 4 option also won’t appear on your credit report.

What is PayBright?

PayBright is a Canadian fintech company founded in 2009 that offers a buy now, pay later service as an alternative to credit cards. The service allows customers to make purchases at participating retailers and pay for them in installments. PayBright supports both online and offline stores and works with over 7,000 merchants.

The service is popular with customers who want to make a large purchase but don’t have the full amount available upfront or who would like to spread out the cost of the purchase over time.

How does PayBright work?

PayBright pays the full amount of your purchase to the retailer. Then, PayBright collects payments from you over a period of time, depending on which payment option you choose.

• Pay in 4 method: You pay off your loan in four payments – and your first installment is due when you check out. There are no interest or processing fees charged on your purchase amount. For example, let’s say you wanted to purchase a pair of $200 Steve Madden shoes. Instead of paying $200 all at once and getting charged to your credit card, PayBright will allow you to make four payments of $50.

• Pay Monthly method: This payment plan allows you to take out an installment loan, with your negotiated interest rate ranging from 0%-21.95% APR, depending on your credit score. Buyers will also be required to pay a processing fee ranging from $1-$4 per transaction.

Does PayBright use a hard credit check?

Yes, but only if you choose the Pay Monthly method. PayBright will perform a hard credit check to make sure you qualify for the loan, which will impact your credit score. But remember that a hard credit inquiry will only lower your credit score by a few points, and one hard inquiry every so often won’t make a big difference when it comes to your overall creditworthiness.

Is using PayBright a good idea?

It depends on your financial situation, and what you’re comfortable with. PayBright is a great tool to help you spread out your payments with the Pay in 4 method, and the Pay Monthly option can help you finance those bigger purchases. But keep in mind that the negotiated interest rate is charged on monthly accounts, so you may end up spending more than you would if you were to pay for the purchase outright.

You’ll also need to keep an eye on your payments, as any missed payments will be reported to the credit bureaus and could negatively impact your credit score. That said, PayBright does create more payment options for customers, and is a great option compared to the typical high-interest credit card.

Looking to build your credit?

If you're looking to build your credit and access credit at the same time, KOHO’s Credit Building tool is a simple and secure way to build your credit history. All you need to do is provide some information about yourself, and KOHO will run a soft check on your credit, which won’t affect your credit score. KOHO will then issue you a balance and report this small amount each month to the credit bureaus as repayment history, which can help you build your credit history, and improve your credit score.