Does Checking Affirm Affect My Credit Score? The Definitive Guide

Yes, checking Affirm can affect your credit score, but it’s crucial to understand how and when. The impact depends on whether Affirm performs a soft credit check or a hard credit inquiry. Generally, checking your eligibility through Affirm’s prequalification process results in a soft credit check, which does not negatively affect your credit score. However, if you proceed with a purchase and Affirm needs to make a final decision on your loan application, they might perform a hard credit inquiry, which can have a small, temporary impact. Let’s delve deeper into the nuances of Affirm and its relationship with your credit score.

Understanding Affirm’s Credit Check Process

Affirm operates on a “buy now, pay later” (BNPL) model, allowing consumers to finance purchases over time. Like any lender, Affirm assesses your creditworthiness to determine your eligibility, interest rates, and loan terms. This assessment involves checking your credit history, but not all credit checks are created equal.

Soft Credit Checks: The Gentle Touch

A soft credit check, also known as a soft inquiry or soft pull, occurs when a lender reviews your credit report for pre-approval purposes. This type of inquiry doesn’t affect your credit score because it isn’t tied to a specific application for credit. Think of it as a peek behind the curtain. It’s a quick look to gauge your general credit health without impacting your credit rating.

Affirm typically uses soft credit checks during the initial stages when you are prequalifying for a loan. This allows you to see potential loan terms and interest rates without worrying about a ding to your credit score.

Hard Credit Inquiries: The Deeper Dive

A hard credit inquiry, also called a hard pull, happens when you formally apply for credit, such as a loan or a credit card. This type of inquiry signals to credit bureaus that you’re actively seeking credit, and it can slightly lower your credit score. The impact is usually minimal and temporary, but it’s something to be aware of.

When you proceed with a purchase using Affirm, the company may perform a hard credit inquiry to finalize your loan application. This is a standard practice among lenders and helps them assess your credit risk more thoroughly. The effect on your credit score is usually small, particularly if you have a good credit history.

Minimizing the Impact on Your Credit Score

While hard credit inquiries are a necessary part of applying for credit, there are steps you can take to minimize their impact:

• Limit applications: Avoid applying for multiple credit products in a short period. Each hard inquiry can lower your score slightly, and multiple inquiries can add up.
• Maintain a good credit history: A strong credit history with on-time payments and low credit utilization can help offset the impact of hard inquiries.
• Understand the process: Be aware of when a soft credit check transitions into a hard credit inquiry. This knowledge helps you make informed decisions.

The Bigger Picture: Responsible Use of BNPL

Beyond the immediate impact of credit checks, it’s important to consider the broader implications of using BNPL services like Affirm. While they offer convenience and flexibility, it’s crucial to use them responsibly to avoid debt and protect your credit score.

On-Time Payments are Key

Making on-time payments on your Affirm loans is crucial for building and maintaining a good credit score. Late payments can be reported to credit bureaus, negatively impacting your credit rating and making it more difficult to obtain credit in the future.

Avoid Overspending

BNPL services can make it tempting to overspend. It’s important to stay within your budget and only borrow what you can afford to repay. Overextending yourself can lead to financial stress and difficulty managing your debts.

Understand the Terms

Before using Affirm, carefully review the terms and conditions of the loan. Pay attention to the interest rates, repayment schedule, and any fees associated with the loan. Knowing these details will help you make informed decisions and avoid surprises.

FAQs: Navigating Affirm and Your Credit Score

Here are 12 frequently asked questions to further clarify the relationship between Affirm and your credit score:

1. Will prequalifying with Affirm hurt my credit score?

No, prequalifying with Affirm typically does not hurt your credit score. Affirm uses a soft credit check for prequalification, which doesn’t impact your credit rating. This allows you to explore your options without the risk of lowering your score.

2. When does Affirm perform a hard credit check?

Affirm performs a hard credit check when you proceed with a purchase and they need to make a final decision on your loan application. This happens after you’ve been prequalified and decided to move forward with financing.

3. How much can a hard credit inquiry from Affirm lower my credit score?

The impact of a hard credit inquiry from Affirm is usually minimal. It typically lowers your credit score by a few points, and the effect is temporary. The exact impact depends on your overall credit profile.

4. How long does a hard credit inquiry stay on my credit report?

Hard credit inquiries typically remain on your credit report for two years. However, their impact on your credit score diminishes over time, especially after the first year.

5. Can I use Affirm to build credit?

Yes, you can use Affirm to build credit if you make on-time payments on your loans. Affirm reports payment information to credit bureaus, so consistent, timely payments can help improve your credit score over time.

6. What happens if I miss a payment on my Affirm loan?

If you miss a payment on your Affirm loan, it can negatively impact your credit score. Late payments can be reported to credit bureaus, lowering your credit rating. It’s important to contact Affirm as soon as possible if you’re having trouble making payments.

7. Does Affirm report to all three major credit bureaus?

Affirm reports to at least one major credit bureau, and potentially all three (Experian, Equifax, and TransUnion). The specific bureaus they report to can vary, so it’s best to check with Affirm directly for the most accurate information.

8. Can I dispute an incorrect hard inquiry from Affirm?

Yes, if you believe there’s an incorrect hard inquiry from Affirm on your credit report, you can dispute it with the credit bureau. You’ll need to provide evidence to support your claim, such as documentation from Affirm.

9. Is it better to pay off my Affirm loan early?

Paying off your Affirm loan early can be beneficial in terms of saving on interest. However, it might not directly impact your credit score. The most important factor is making on-time payments throughout the loan term.

10. How does using Affirm compare to using a credit card?

Using Affirm is similar to using a credit card in that you’re borrowing money to make a purchase. However, Affirm typically offers fixed interest rates and repayment schedules, while credit cards can have variable rates and more flexible repayment options. Both can impact your credit score, so responsible use is essential.

11. What credit score do I need to get approved for Affirm?

Affirm doesn’t publicly disclose the exact credit score required for approval. However, having a fair to good credit score generally increases your chances of getting approved. Other factors, such as your income and debt-to-income ratio, also play a role.

12. Can I refinance my Affirm loan?

Affirm does not typically offer loan refinancing. Once you’ve taken out a loan, the terms are generally fixed. If you’re struggling to make payments, it’s best to contact Affirm to discuss your options.

By understanding the nuances of Affirm’s credit check process and using the service responsibly, you can enjoy the benefits of BNPL without jeopardizing your credit score. Remember that making on-time payments and avoiding overspending are key to maintaining a healthy credit profile.