Normally, processing for a BNPL account is done electronically, and no documents need to be submitted.
The BNPL sector in Australia currently operates under a voluntary code of conduct, which requires operators to carry out a number of assessments to ensure you can repay a BNPL loan. But how these assessments are made is open to some interpretation.
Most BNPL providers do a ‘soft credit check’ when they confirm your details and allow you to sign up, but this check is not recorded on your credit score. Others will approve you for a BNPL account without doing a credit history check.
For example, Afterpay will instantly allow you to go without a credit check if you’re at least 18, have a personal email address and mobile phone number, and have an active credit or debit card in Australia. Splitit also doesn’t do any credit checks, but instead just requires an available balance on your credit card.
BNPL players that require a credit check before approving your account include Zip Money, Zip Pay, Openpay, Klarna, bundll, Laybuy and Latitude Pay. Humm will request a credit check in some cases, depending on the size of the loan.
Although a soft credit check is not listed on your credit report and therefore will not affect your credit score, be aware that if you miss a BNPL payment, this may end up on your credit report, which will affect your credit score.
In addition, the federal government has expressed interest in the loophole that allows BNPL to escape the regulation applied to other credit products under Australian law. This may involve more detailed credit checks, so watch this space.
Benefits of BNPL no credit check?
First, you can be approved very quickly. You can be standing in your favorite store with that new dress in your hand and take the dress home without paying a cent 10 minutes later.
Not only is it much faster to get approved, but the lender doesn’t know what your financial history is. Therefore, consumers who do not always meet their financial obligations may be able to access this type of credit, despite not necessarily being able to get a credit card.
It also means that consumers with poor credit history are not penalized for mistakes they may have made.
Disadvantages of BNPL no credit check?
Let us count the ways.
Remember that BNPL is not currently covered by the same obligations that banks and other lenders are subject to, which means that BNPL lenders do not have to check whether you can afford the payments.
Without the need to do a credit check to make sure you’re handling your finances well so far, it’s easy to get in over your head. This means that you can get into financial trouble if you make too many purchases and can’t make payments on time.
If you have poor impulse control, you may end up spending more than you really can. If you don’t trust money or have a poor track record of handling your finances, be very careful.
Some people now rely on BNPL to pay for everyday expenses like groceries, which means refunds can come in thick and fast, making it harder to track what the payment is for. It also means you need to make sure you have enough money in your credit or debit card to cover each payment.
And of course if you miss a scheduled repayment, you can be subject to high fees and charges, which can affect your credit score.