What Is Buy Now Pay Later and What Does It Mean for My Mortgage Applications?

Written on 24 April 2025 by Nicholas Mendes

What is Buy Now Pay Later?

Buy Now Pay Later (BNPL) schemes allow consumers to purchase items on credit and delay repayment, usually through interest-free instalments or a short deferral period. They’ve become increasingly popular among online and high-street retailers, particularly with younger shoppers seeking flexible payment options. Klarna, Clearpay and Laybuy are among the most widely used providers, each offering slightly different structures and terms.

While BNPL offers a convenient way to manage short-term spending, it’s not without its drawbacks. One of the key concerns is how easy it can be to overspend. Because there’s no immediate cost at checkout, people are more likely to make impulsive purchases or commit to multiple BNPL agreements without fully realising how much they owe. If payments are missed or delayed, particularly with providers that report to credit reference agencies, this can negatively affect your credit score.

How Does BNPL Affect Your Mortgage Application?

When assessing mortgage applications, lenders look at your overall financial health. This includes income, regular outgoings, outstanding debts and your credit history. BNPL usage is increasingly being scrutinised as part of this assessment, especially as more providers begin reporting to credit agencies. A lender reviewing your application will typically conduct a credit search, which may reveal BNPL commitments, repayment history and any missed payments.

A one-off BNPL purchase repaid on time, such as £50 over 30 days, is unlikely to have a major impact. However, if you're consistently using BNPL for larger purchases or over longer terms, such as six monthly instalments, this could be seen as a sign of over-reliance on short-term credit. In some cases, it may reduce the amount you’re able to borrow or even result in your application being declined.

It’s also important to note that not all BNPL providers report to credit reference agencies at the moment, but this is changing. Klarna and Laybuy, for example, have started sharing data with credit agencies, while Clearpay may still be more limited in this respect. However, even if a BNPL agreement isn’t on your credit report, it may still appear on your bank statements, which lenders can assess as part of your affordability.

Is BNPL Considered a Line of Credit?

Yes, it is. Although BNPL is often interest-free and marketed as a flexible payment tool, it’s still a form of borrowing. Most providers conduct soft credit checks when you sign up or make a purchase, which won’t affect your credit score. But for longer-term finance plans, some may run a hard check, which is visible to other lenders.

The key takeaway is that BNPL should be treated like any other credit product. It affects your financial profile, especially as the industry becomes more regulated and transparent.

Can You Use BNPL with Bad Credit?

Many BNPL services are available to people with limited or poor credit histories. Approval is usually based on internal checks and payment history with the provider rather than a strict credit score threshold. That said, using BNPL when struggling to manage other debts can quickly become a problem. It’s easy to underestimate how quickly balances across different providers can add up.

What’s Changing in BNPL Regulation?

The UK government is introducing new regulation to bring BNPL in line with other forms of consumer credit. These changes, expected to roll out during 2025, include making affordability checks mandatory before purchases are approved, ensuring clearer terms and conditions, and requiring providers to report borrowing activity to credit reference agencies.

This shift means BNPL agreements are likely to have a greater impact on mortgage affordability checks moving forward, reinforcing the importance of managing these commitments carefully.

How to Protect Your Mortgage Chances

If you’re planning to apply for a mortgage soon, it’s worth reviewing your financial commitments. Try to avoid taking on new BNPL agreements in the months leading up to your application. Clear existing balances where possible and always ensure payments are made on time to avoid late fees and potential damage to your credit profile.

Overpaying on your existing mortgage, if you have one, is another way to improve your financial position. Just be mindful of any early repayment charges that may apply.

Ultimately, BNPL isn’t inherently bad for your mortgage chances, but how you use it matters. Responsible, occasional use is unlikely to cause concern. However, regular high-value borrowing or missed payments could raise red flags with lenders.

If you're unsure how BNPL or other short term credit commitments might affect your mortgage application, speaking to a mortgage adviser can help you understand your options and avoid potential obstacles.