How Affirm May Impact Your Credit Score

Using Affirm can influence your credit score, but its impact depends on the loan type and your payment habits. Here’s a look at how the process generally unfolds from application to payoff.

1. Initial Application: When you first prequalify, Affirm typically performs a soft credit inquiry. This initial check doesn’t affect your credit score, letting you view loan options without any negative impact.
2. Loan Reporting: If you accept a loan, especially a longer-term installment plan, Affirm may report it to a credit bureau like Experian. However, shorter "Pay in 4" plans are often not reported.
3. Payment History: This is the most crucial stage. Making on-time payments can build a positive credit history. Conversely, late or missed payments can be reported and may lower your credit score.
4. Credit Mix and Debt Load: An Affirm loan is an installment loan, which can diversify your credit mix—a positive factor. At the same time, it adds to your total debt, which is also considered.
5. Loan Completion: Paying off your loan on time and in full is a positive event for your credit report. It demonstrates responsible borrowing and can contribute favorably to your credit history over time.

How Much Will Affirm Affect Your Credit Score?

The impact Affirm has on your credit score depends on several factors. Here are the main things to consider before you decide to use the service.

• Credit checks. Prequalifying for a loan only requires a soft credit check, which won't affect your score. However, accepting certain loan offers may result in a hard inquiry, which can cause a temporary dip.
• Payment reporting. Affirm reports your payment history to at least one credit bureau, typically Experian. Making on-time payments can positively impact your credit, while late payments can have a negative effect.
• Credit mix. An Affirm loan is a type of installment loan, which can help diversify your credit profile. This can be beneficial for your score, especially if you primarily have revolving credit like credit cards.

How You Can Avoid Affirm Affecting Your Credit Score

Prioritize On-Time Payments

The most critical factor is making all your payments on time. Affirm may report your payment history to credit bureaus. Consistent, timely payments can build a positive history, while late or missed payments will likely have a negative effect on your credit score.

Understand Loan Reporting

Not all Affirm loans are reported. Typically, "Pay in 4" plans and some 0% APR loans are not shared with credit bureaus. Longer-term installment loans, however, are more likely to be reported. Always check the terms before you commit to a purchase.

Limit Multiple Loans

Avoid opening numerous Affirm loans in a short period. While Affirm uses a soft credit check, having several active loans increases your overall debt. This can be viewed negatively by other lenders and may impact your credit utilization ratio, a key scoring factor.

Choose the Right Card to Affirm

No matter your starting point, improving your credit score is an achievable goal that pays dividends for your financial health. With consistent effort and a few proven methods, you can see meaningful changes in as little as three to six months.

• Monitor your credit reports. Regularly check your reports from all three major bureaus to spot and dispute inaccuracies or signs of identity theft.
• Establish automatic bill payments. Your payment history is the most significant factor in your score, so setting up automatic payments ensures you never miss a due date.
• Reduce your credit utilization. Aim to keep your credit utilization ratio below 30% by paying down balances or requesting a credit limit increase.
• Become an authorized user. Being added to an account with a strong payment history can help boost your score, as long as the account reports to all bureaus.
• Limit hard inquiries. Space out new credit applications and use prequalification tools to avoid temporary drops in your score from too many inquiries.

The Bottom Line

Using Affirm can affect your credit score. While timely payments might help build your credit history, missed payments can negatively impact it, as they are reported to credit bureaus.

Frequently Asked Questions

Does Affirm perform a hard or soft credit check?

Affirm conducts a soft credit check for prequalification, which won't affect your score. However, accepting a loan may result in a hard inquiry.

Does paying off an Affirm loan early improve my credit score?

While financially responsible, paying off an Affirm loan early doesn't significantly boost your credit score. Consistent, on-time payments carry more weight with credit bureaus.

What happens if I miss an Affirm payment?

Missing a payment can lead to late fees. Affirm may also report the delinquency to credit bureaus, which could negatively impact your credit score.