Credit Building > Does PayPal Pay in 3 Help Build Your Credit Score?

Does PayPal Pay in 3 Help Build Your Credit Score?

Wollit Team3 minute read · Updated 26th February 2025

If you're considering using PayPal Pay in 3, you might be wondering whether this popular Buy Now, Pay Later service can help improve your credit score. Understanding how these payment options affect your credit profile is essential for making informed financial decisions.

What is PayPal Pay in 3 and how does it work?

PayPal Pay in 3 is a Buy Now, Pay Later (BNPL) service that allows users to split purchases into three equal instalments. The first payment is made at the time of purchase, with the remaining two payments due over the next two months. This service is interest-free and designed to make larger purchases more manageable for consumers. Unlike traditional credit products, PayPal Pay in 3 typically involves a soft credit check, which does not impact your credit score.

Does PayPal Pay in 3 improve your credit score?

PayPal Pay in 3 can potentially help build your credit score if payments are made on time and consistently. PayPal reports repayment history to at least one major credit reference agency, such as TransUnion, which means your payment behaviour can influence your credit report. Positive repayment history demonstrates financial responsibility, which is a key factor in improving your credit score.

However, the impact on your credit score may be limited compared to other credit-building tools, as BNPL services are not always reported to all credit agencies.

Does PayPal Pay in 3 affect your credit report?

While applying for PayPal Pay in 3 does not involve a hard credit check, your repayment history for it may still appear on your credit report. Missed or late payments can result in negative markers on your credit report, which can lower your credit score and remain visible for up to six years.

It's important to understand that consistent, on-time payments are crucial to avoiding any negative impact on your credit report. For more on how credit reports work, check out our guide on credit score basics.

What are the benefits of using PayPal Pay in 3?

PayPal Pay in 3 offers a convenient way to manage larger purchases without incurring interest fees. It can help users spread costs over time, making budgeting easier. For those looking to build credit, responsible use of PayPal Pay in 3 can contribute to a positive credit history.

The service is accessible to many users, as it typically involves only a soft credit check, making it a low-risk option for those with limited credit history.

What are the risks of using PayPal Pay in 3?

Missed or late payments can negatively affect your credit score, as they may be reported to credit reference agencies. Using PayPal Pay in 3 irresponsibly can lead to overspending, which may result in financial strain or difficulty managing repayments.

BNPL services like PayPal Pay in 3 are not regulated in the same way as traditional credit products, meaning they may lack certain consumer protections. It's important to monitor your spending and ensure you can meet repayment obligations to avoid potential financial pitfalls.

Does PayPal Pay in 3 require a credit check?

PayPal Pay in 3 typically involves a soft credit check during the application process, which does not impact your credit score. Soft credit checks are used to assess your eligibility for the service without leaving a visible mark on your credit report.

However, PayPal reserves the right to perform additional checks if necessary, so it's important to provide accurate information during the application process.

How does PayPal Pay in 3 compare to other credit-building methods?

While PayPal Pay in 3 can contribute to your credit history, dedicated credit builder services like Wollit may provide more comprehensive credit improvement. Wollit reports your payments to all three major credit reference agencies (Experian, Equifax, and TransUnion), potentially offering a more significant impact on your overall credit profile.

Additionally, traditional credit products such as credit cards, when used responsibly, often have a more established track record of improving credit scores. However, these typically require stricter credit checks and may come with interest charges if not managed carefully.

Making the right choice for your financial goals

If your primary goal is to make a purchase more manageable by spreading the cost, PayPal Pay in 3 offers a convenient, interest-free option. However, if you're specifically looking to build or improve your credit score, you might want to consider dedicated credit improvement services alongside or instead of BNPL options.

The key to any credit-building strategy is consistent, responsible financial behaviour. Whether you're using PayPal Pay in 3 or other financial products, making payments on time and managing your finances responsibly will contribute positively to your credit profile over time.

For a more targeted approach to improving your credit score, explore how Wollit's Credit Builder service can help you establish a positive credit history with all major UK credit reference agencies.

• Credit Score Factors