Does PayPal Credit affect your credit score?

Quick answer: PayPal Credit can affect your credit score, especially when you first make the application. However, the long-term impact can be positive if you manage your balance responsibly.

PayPal Credit has proved to be very popular with consumers over recent years. It’s a form of credit linked to a PayPal account which can be used to make purchases online and works similarly to a credit card. However, a key difference is that the service doesn’t come with a physical card. PayPal Credit comes with various benefits and is accepted in most environments where conventional PayPal is accepted. It’s important to find out whether it will affect your credit score before you go ahead and apply for it if the potential impact is something you’re concerned about. In this guide, we’ll tell you about the relationship between PayPal Credit and your credit score so you can make an informed decision on making an application.

How does PayPal Credit work?

If you are given access to PayPal Credit, you’ll be able to add it to your PayPal Wallet. You can use it like a credit card by choosing it as a funding source when you make a purchase. You’ll receive a monthly statement that details your transactions and tells you what your minimum repayment amount is. You can either make these repayments through Direct Debit, from your payment account or by getting in touch with the customer service team at PayPal.

How much interest will I pay?

If you’re making any purchases worth less than £99, you’ll be charged interest at a standard variable rate if you don’t pay off the full amount by the required date on your statement. You have six months to pay for items under £99 without generating interest, but only four months for things worth over £99. Once this time has elapsed, interest will be applied. You may be able to pay in instalments when making purchases with specific merchants. PayPal Credit has a variable APR rate of 23.9%, but the site says “your actual interest rate and credit limit may vary depending on your individual circumstances”.

Will my credit score be affected if I use PayPal Credit?

Your credit score can be affected not only if you use PayPal Credit but if you simply apply for it too. When you make an application, PayPal will run a full hard check which will appear on your credit report. A hard check is a thorough background check which is used to determine whether you are a suitable applicant for credit.

Making an application with PayPal Credit can hurt your credit score due to the hard check that the company carries out after your application. PayPal works with a bank so your application can be evaluated and audited. The hard search will stay on your credit report for two years and can reduce your credit score by a few points.

PayPal also reports information to credit agencies once you start using the service. This means you can expect your score to fall if you miss any payments or make any late ones. Your score could fall as soon as this information is received by the agencies.

It’s also worth noting that there could be a substantial impact on your credit score if you apply for various financial products in a short period of time. If you have already applied for finance including loans, mortgages and credit cards, it could be worth waiting a while before you make an application for PayPal Credit to minimise the impact on your score. Each of these applications normally involves a hard check.

What kinds of fees does PayPal Credit charge?

You won’t be charged an annual fee to use PayPal Credit, but you will be charged £12 for late payments, £12 for return payments and £5 if you need a physical copy of a previous statement.

Am I likely to be eligible for PayPal Credit?

You won’t be able to use PayPal credit before you’ve applied for a credit line. You’ll need to be aged over 18 and a UK resident. PayPal say they expect applicants to have a good credit score, although no specific details on how much this needs to be are available. You won’t be able to access PayPal Credit if you have recently been made bankrupt. You’ll need to earn over £7,500 each year and must be in employment.

What happens when you make a PayPal Credit application?

One of the first things that will happen when you make an application is a credit score verification. If PayPal is happy with your credit score, it will then carry out a hard check.

What are the consequences of late or missed PayPal Credit repayments?

It’s very likely that your credit score will be affected if you don’t make your repayments on time. If you leave it too long, PayPal could get in touch with a debt collection agency. It’s wise to do all you can to ensure you’re making your repayments on time if you are accepted for PayPal Credit.

Will my score be affected if I want to increase my PayPal credit limit?

A hard or soft credit check may be carried out depending on the circumstances. If you apply to boost your credit limit, PayPal might run a soft check which won’t appear on your report. However, it may also carry out a hard check. Some customers are offered the chance to raise their credit limits after three months of using the service. It can be helpful to raise your credit limit without adding to your PayPal Credit balance. This is because this will reduce the amount of available credit you’re using, which can be very effective when it comes to improving your credit score.




Will my credit score be affected if I close my PayPal Credit account?

Your credit score may drop on a short-term basis if you decide to close your PayPal Credit account. This is because you will have less credit available to you overall. You should also pay off your balance before you close your account to prevent a bigger decline in your credit score.


PayPal Credit can be beneficial if you want to make purchases in instalments and avoid interest for several months. You can expect your credit score to drop slightly when you apply for it, but there could be a positive impact on your report if you use PayPal Credit wisely and make your repayments on time. It can help you avoid using other forms of credit such as credit cards which may charge you more interest. Nonetheless, it’s always wise to spend sufficient time thinking about whether you genuinely need this credit before you go ahead and make your application.

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