Is your buy now, pay later habit denting your mortgage chances?

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Borrowers with a “perfect credit score” and a “few” buy now, pay later transactions have been declined mortgages, brokers have told the Money blog in an exclusive survey.

Several brokers told us a client’s regular use of BNPL services was a factor in their rejection by a high street lender.

Brokers have urged lenders to change the way they judge prospective borrowers with BNPL payments on their credit file.

In response to our findings, two of the biggest BNPL companies hit back, saying they provided innovative services and the rest of the financial industry should catch up.

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What is BNPL – and how do lenders get your usage data?

These schemes allow customers to spread out payments on purchases interest-free and are used by almost 11 million Britons, according to the Financial Conduct Authority.

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Major UK lenders use data from at least one of these credit reference agencies to assess mortgage applicants, along with bank statements and other checks.

None of the BNPL companies perform hard credit checks before allowing a customer to use their services – so that part has no effect on your credit score.

However, payment data is shared, which can have an impact. Missed or late payments can have a negative effect, but BNPL companies say making payments on time can have a positive impact.

But some brokers have seen BNPL payments, whether completed or not, having the opposite effect on mortgage applications.

‘Credit files 150 pages long’

In a survey of 21 brokers commissioned with the Association of Mortgage Intermediaries (AMI), a trade body, 67% of brokers said BNPL had either played a part in or caused a user’s rejection by a high street lender.

Of those, 40% said their client had “regularly” used BNPL, and 21% said they had used it “habitually”.