Zip is one of the popular Buy Now Pay Later Apps that is known for its Pay in 4 payment option. If you are using Zip or planning to use Zip and are curious to know if Zip reports your data to Credit Bureaus, read on.
Zip is an Australia-based Buy Now Pay Later Service founded in 2013. In 2017, it acquired US-based BNPL provider QuadPay to tap the US market. Zip has more than 2 million customers in the US and competes with Klarna, AfterPay, Affirm, etc.
Zip offers Pay in 4 installments as a standard offering where you can pay for your purchase in four installments. Each installment is due in a span of two weeks. Zip does not charge interest but there is a $7 late fee for missing payments. The late fees
Does Zip Report to Credit Bureaus?
Like other BNPL companies, Zip does not perform a hard credit check at the time of application. So you don’t need to worry about Zip coming up in the credit report when you apply for Zip pay in 4 plan.
And as long as you are paying your installments on time, there is no reporting to Credit Bureaus. But on the flip side, your positive behavior like paying your Zip installments on time also doesn’t make it to your credit report.
Does Zip Affect your Credit?
Late payments or missed payments on your Zip BNPL installments can have a negative impact on your credit score.
However, the possibility is more in case of defaults where your loan gets placed with a debt collection agency.
Below is the relevant fine print from Zip terms of service:
You also agree that if you fail to pay any amount owed to Zip pursuant to this Agreement, Zip may engage in collection efforts to recover such amounts from you. These collection efforts may involve contacting you directly, submitting your information to a collections agency, or taking legal action. We may report information about this Agreement to credit bureaus. Late payments, missed payments, or other defaults on this Agreement may be reflected in your credit report.Zip Terms of Service
At present, Zip does not need to report on-time credit payments to credit bureaus. So your on-time payments do not help you build up a credit score.
However, this is expected to change in the future. Recently, the Consumer Financial Protection Bureau (CFPB) in the US has opened an inquiry into the practices of all major BNPL providers including Zip and there may be a requirement in the future for BNPL companies to report data to credit bureaus.
The major credit bureaus are already preparing their systems to be able to get their data from BNPL companies. While it is not clear at the moment how the data will be used. But the plan seems to include both the on-time payments and defaults in the reporting. Once there is regulatory clarity, this may impact your credit score in the long term.
So this is both a positive and negative if you are paying your BNPL installments on time, it may be able to help your credit score in the future. While late payments can and will continue to have a negative impact.
ZIP Fine Print On Terms of Service
3.3. CREDIT BUREAU REPORTING. You authorize us to investigate your creditworthiness and to obtain consumer reports about you in connection with your application for the right to use our Services and for as long as your account is open and/or this Agreement is in effect. You authorize us to use such information and consumer reports for any purpose, including without limitation, to evaluate your application, to service and collect your account, to review whether changes should be made to the terms of your account, and to consider you for offers for other products and services. You represent to us that all information associated with your identity held by any national credit bureau is true and correct in all material respects and that there has been no Material Adverse Change that is not reflected therein.
Even in the current form, BNPL services seem to have an impact on credit scores for those who have missed payments.
As per a survey by Credit Karma,
- 34% of BNPL service users have fallen behind on one or more payments
- 72% of those who missed payments believe their credit score declined as a result (31% saying their credit score declined significantly)
Does Zip show up on your Credit Report?
Zip does not perform a hard credit check and does not show up on the credit report. However, if you have missed or made late payments, it may show up on the credit report.
This may change in the future as there is increasing demand from regulators to include BNPL transaction data on the credit reports.
Does ZIP increase your credit limit?
No, Zip currently does not report on-time payments to credit bureaus and there is no impact on your credit limit, even if you have been paying your BNPL installments on time.
So Zip does not report to credit bureaus unless it is a case of default-missed or late payment. In the future, this may change and you may see your BNPL transactions data forming a part of your credit reports which can help improve your credit score if you have a good on-time payment track record.