Does Paypal Credit Affect Your Credit Score?

If you’ve ever logged into PayPal and saw the term “PayPal credit” or were shopping and saw that you can purchase an item using PayPal credit, you may be wondering whether PayPal credit affects your credit score? We will answer this question in much detail below.

Does Paypal Credit Affect Your Credit Score?

Yes, PayPal credit does affect your credit score because when you apply for PayPal Credit, you’re essentially applying for a line of credit, and Paypal’s partner Comenity Capital Bank will conduct a review of your credit report. Since the partner conducts a review of your credit report, a hard inquiry will appear on your credit report, slightly lowering your credit score.

The hard inquiry that’s added to your credit report as a result of a credit check will remain on your credit report for 2 years from the date that Comenity Capital checks your credit report. After 2 years, the hard inquiry will automatically be removed from your credit report.

Experts agree that hard inquiries will only affect your credit score for 12 months, after which their effect will begin to decrease until they’re ultimately removed from your credit report.

That said, even though applying for PayPal Credit will result in a hard inquiry, the status of the your account is not reported to the credit reporting bureaus, so whether you make payments or fail to make them, such activity will not affect your credit because it’s not reported to the credit reporting bureaus.

Why Do Consumers Use Paypal Credit?

Many people choose to use Paypal Credit because it allows them to finance their purchases, as well as make payments after 6 months of making the purchase without paying any interest. Paypal credit is available at any merchant that offers you the ability to pay with PayPal. Paypal promotes this service by advertising that you can be approved for Paypal credit in seconds.

That said, before you apply for PayPal Credit, you should know that by simply applying, you’re authorizing Paypal and its partner to access your credit report, which will result in a hard inquiry being added to your credit report because you’re essentially opening a line of credit to finance your purchase.

That said, the benefit for using PayPal Credit is that you get 6 months to pay off your purchase without paying a single dollar in interest. So, it might be worth it for some consumers to use PayPal Credit, but keep in mind that a hard inquiry will be placed on your credit report.

Although a single hard inquiry will not hurt your credit score by much, if you submit too many credit applications within a short period of time, you could significantly lower your credit score. As a rule of thumb, you should leave approximately 6 months between each hard inquiry that’s added to your credit report.

How Does The No Interest For 6 Months Offer Work?

According to PayPal’s website, if you make a purchase of $99 or more, you will not be charged any interest on the transaction so long as you pay the balance within 6 months of making the purchase. However, if you do not pay the balance within 6 months, you will be charged interest from the date of the purchase. So, if you do choose to use PayPal credit and you want to take advantage of the no-interest offer, you should pay off your purchase within 6 months of making it, otherwise, you will be charged interest.

How Can You Apply For PayPal Credit?

If you’re interested in PayPal Credit, you can apply for it directly on the PayPal website or through an online merchant where you shop. For example, if you’re shopping at an online merchant, you will be given the option to pay using PayPal credit when you select PayPal as your payment method. Once you click on PayPal credit, you will have to add some information and submit your application. Your application will take a few seconds to process, and you will either be approved or denied for PayPal credit. If approved, a line of credit will be opened for you, and you can then use that line of credit to make purchases through PayPal.

Bottom Line

At this point, you may know that applying for PayPal credit can affect your credit score because of the hard pull of your credit. However, hard pulls, commonly known as hard inquiries, will only lower your credit score by a few points. If you have too many hard inquiries on your credit report, you should try to minimize the amount of new credit applications that submit, however, if you have little to no inquiries, you shouldn’t worry too much about adding a single inquiry to your credit report to apply for PayPal Credit.