Understanding the BNPL Appeal
Buy Now, Pay Later services have become a popular payment option in India, especially for young, tech-savvy consumers. Platforms like LazyPay, ZestMoney, and Amazon Pay Later allow you to purchase items immediately and pay for them in interest-free instalments
over a few weeks or months. The appeal is obvious: instant access to products without the immediate financial hit. For many young adults who may not have a credit card or a long credit history, BNPL feels like a simple and accessible form of credit. The approval is almost instant, often requiring minimal paperwork, making it a frictionless way to shop for everything from gadgets to groceries.
The Hidden Impact on Your Credit Score
Many users don't realise that BNPL is a form of borrowing, and it can significantly affect your CIBIL score. While some providers may not report to credit bureaus, many major players in India now do. Each BNPL transaction can be reported as a small personal loan on your credit file. Missing or delaying even one payment can be reported as a default, negatively impacting your score. A single late payment can lower your score just like a missed credit card EMI would. Furthermore, having multiple active BNPL accounts can signal to lenders that you are overly reliant on credit, which they view as risky behaviour. A report from CIBIL highlighted that a significant percentage of BNPL users saw a decline in their credit scores, which could affect their future ability to get loans for a car, home, or education.
The Psychology of a Debt Trap
The design of BNPL services can encourage impulsive buying. The idea of splitting a purchase into small, manageable payments makes the total cost seem lower, leading people to spend more than they can truly afford. This instant gratification can cloud financial judgment, making it easy to accumulate debt across several platforms. A common scenario involves making a small purchase on one app, then another on a different one, and quickly losing track of the total outstanding amount and various due dates. Before you know it, what started as a convenient way to shop becomes a stressful cycle of debt that is difficult to escape.
Smart Strategies to Protect Your Credit
The key to maintaining a healthy credit score is financial discipline. Instead of relying on BNPL, young adults should focus on proven methods of financial management. First, create a budget to track your income and expenses. This helps you understand what you can afford without borrowing. Second, build an emergency fund for unexpected expenses. This prevents the need to use credit for every small crisis. If you do need credit, consider using a credit card responsibly. Paying your credit card bill in full and on time is one of the most effective ways to build a strong credit history. Keeping your credit utilisation ratio—the amount of credit you use compared to your limit—below 30% is also crucial for a good score.
Building Good Credit the Right Way
Building a good CIBIL score takes time and consistency. A score of 750 or above is considered excellent and can help you secure better interest rates on future loans. The most important factor is always paying your bills on time, whether it's a credit card bill, a loan EMI, or even your utility bills. If you are new to credit, you could start with a secured credit card or take a small consumer loan for an essential purchase and repay it diligently. Regularly check your credit report for any errors or unrecognised accounts. Responsible financial habits, not quick-fix payment schemes, are the foundation of a secure financial future.
