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Buy now and pay later - a trend that is quickly taking hold of consumers across the nation. Affirm is a fast-growing lender that allows consumers to “buy now and pay later,” also referred to as a BNPL company. They offer structured payment plans for both online and in-store shopping with select retailers. But, what is the desired credit score needed for Affirm approval? And, can all lenders qualify?
Many Americans are struggling financially, even with day-to-day expenses. Groceries, gas, appliances, clothing, and general household expenses are all on the rise with inflation. Therefore, companies such as Affirm are becoming more useful and in high demand across the country. However, not all borrowers will qualify for lending with Affirm.
Let’s take a look at how Affirm works and what it takes to qualify for lending with BNPL companies such as Affirm.
So, how does Affirm work?
Affirm’s lending works similarly to other buy-now-pay-later providers, such as PayPal and Afterpay. These BNPL companies allow borrowers to purchase items and spread out the payments over an installment plan. Then, the installment plan is either approved or denied based on several factors.
The BNPL’S approval policies and the applicant’s eligibility play key roles when applying for Affirm lending. The applicants’ financial strength and their credit score carry the most weight when it comes to qualifying with a BNPL like Affirm.
Affirm payment programs offer the two features mentioned above and combine them with no interest or fees. Large retail chains like Target and Walmart offer credit cards, but they come with interest rates.
Therefore, using a zero-interest plan with Affirm offers you a competitive advantage while shopping. But, what happens when you’re unable to make payments? This is where the policy shifts.
The no-interest plan offered by Affirm only applies to their four-installment payment plans and three-month payment plans. Affirm will charge their customer if the borrower cannot pay or needs to extend their payment plan. Before committing to a system like Affirm, be sure that you can pay each installment in a timely manner. Otherwise, you run the risk of hurting your credit score.
What is the necessary credit score to qualify for Affirm? The answer is more nuanced than you may realize.
While each applicant's experience will vary, if your credit score is 640 or higher, you will likely be approved by Affirm. A prequalification process is required to get lending with Affirm. While a score as low as 540 may get you approved for some lending, there is a limit. Also, Affirm imposes a limit on how much you can spend for credit scores lower than 640. With a credit score of 640 or higher, you possess more freedom when it comes to the amount you can spend on a purchase.
Affirm also states that borrowers are “more likely to be approved” if they have a credit score of 640 or higher. If your credit score is below 640, Affirm will utilize other factors to determine your eligibility for lending. Multiple factors influence your eligibility, such as:
This information is used to determine your chances of approval for Affirm lending. If you’re worried about receiving approval, be sure to speak with a trusted specialist.
Currently, Affirm appears to offer loan amounts ranging from $50 - $17,500. While their pay-in-four offers come with zero percent interest, their other payment plans appear to go as high as 30% APR.
Does Affirm impact your credit score, and if so, how?
One of the most popular perks of Affirm is that applying for credit with them does not impact your credit score. You can create an account and complete the prequalification process with no impact on your credit. Generally speaking, their prequalification process requests soft inquiries on your account. They do not request hard inquiries on your report, making this process much more seamless than other BNPL platforms.
Soft inquiries only require your phone number and address, and do not show up on your credit report. Whereas hard inquiries utilize your social security number, income, and debt-to-income ratio, and will appear on your credit report.
However, there are other ways that utilizing Affirm’s lending services may impact your credit score. The following actions with Affirm will most likely show up on your credit report:
When you do the prequalification process with Affirm, you will only be given an amount that you qualify for. Additionally, you will be given various options for payment plans. You do not need to utilize or accept the full amount offered. The application process itself does not impact your credit.
Many borrowers utilizing Affirm’s BNPL services often miss one key aspect of their terms. If you need to extend the payment installments on your initial purchase, these extensions are not interest-free. While a pay-in-four payment plan may come with zero interest, there are caveats. If you miss a payment or need to extend the repayment plan, interest will begin to accrue. Be aware of this before applying for an Affirm loan.
If you want to utilize buy-now-pay-later lenders such as Affirm, but your credit is not up to par yet, Credit Glory can help.
Borrowers need to have a “fair” credit score to qualify for lending approval with Affirm and other BNPLs. Some consumers have reported approval with Affirm with low or “bad credit.” However, your odds of receiving approval, and being approved for more credit, increase when your credit score is 640 or above.
If you need help cleaning up your credit report by disputing inaccurate information, our credit specialists are here to help. Contact us today for a consultation and get on the road to a healthier financial future.
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