Should new-to-credit individuals use BNPL to build their credit score?

In August 2025, Paizabazaar released a report titled: “How India Checked Credit Score”. Over 30 days, the survey attracted participation from 4.7 million participants from 710 cities. Out of these, 25% of the participants were Gen-Z (18 to 28 years) with an average credit score of 742.

The survey shows how individuals are eager to build and maintain a good credit score right from a young age. A challenge that youngsters face is getting access to credit instruments like credit cards and loans to build their credit score.

If you are a new-to-credit individual, you can consider credit instruments like secured credit cards, buy now pay later (BNPL), etc., to start building your credit score and profile.

In this article, we will explore what buy now pay later is, how it works, who offers it, how you can use it to build your credit score and profile, and what happens when you don’t repay the BNPL amount on time.

What is BNPL, and how does it work?

Buy Now Pay Later is a credit instrument/product that allows a user to buy a product/service on credit. It is a short-term financing option for the user. The merchant gets paid by the entity offering the BNPL facility. The user later pays the entity offering the BNPL facility.

For example, Amazon offers the BNPL facility through Amazon Pay Later. An Amazon customer can go through the usual shopping process of choosing a product and adding it to their cart. On the payment page, a registered customer can select the Amazon Pay Later option for payment and complete the purchase transaction.

BNPL facility is provided in a tie-up with a bank/NBFC lending partner

The BNPL facility is usually offered by e-commerce marketplaces, fintechs, banks, etc. They provide the BNPL facility through tie-ups with banks and NBFCs. It is the bank/NBFC that provides the credit facility. For example, Amazon Pay Later has a tie-up with IDFC FIRST Bank and Axio (an NBFC). In this case, IDFC FIRST Bank/Axio pays the Amazon merchant for the customer’s purchase transaction. The Amazon customer later repays IDFC FIRST Bank/Axio.

Repayment options

Companies providing the BNPL facility offer various repayment options to customers. For example, Amazon Pay Later provides the customer with two repayment options (where the lender is Axio). A customer can either repay the entire amount next month (buy now, pay next month) or choose an EMI plan for 3 to 12 months (buy now, pay in EMIs). Amazon Pay Later offers 3, 6, 9, and 12-month EMI plans. There is no interest cost for the customer when they pay the entire outstanding amount next month. However, there may be an interest cost for EMI plans.

On the payment page, on selecting the Amazon Pay Later option, the customer has to choose from the two repayment options. If the customer chooses the EMI option, they must select the EMI tenure.

Some companies have a 15-day repayment cycle, wherein the customer pays twice a month. For example, LazyPay provides two repayment options. A customer can pay every 15 days or choose an EMI plan (3, 6, 9, 12 months EMI plans).

One-time registration for credit limit set-up

The BNPL facility can be considered as an alternative to credit cards. A customer has to do a one-time registration for credit limit set-up. During the registration process, the company will collect details like mobile number, KYC (photograph, PAN Card number, and address proof), age eligibility criteria, bank account details, etc. After processing the above information, the BNPL company’s lending partner will arrive at a credit limit for the customer.

The customer can use this credit limit for making a single or multiple purchases. For example, suppose a customer has a Rs. 10,000 Amazon Pay Later limit. The customer can make purchases of up to Rs. 10,000 in a single or multiple transactions in a monthly billing cycle.

The BNPL company reviews your repayment performance regularly. When you make timely repayments every month, the BNPL company may reward you with an increase in your credit limit. With a higher credit limit, you can make bigger purchases.

Who offers BNPL?

Various e-commerce marketplaces, fintechs, NBFCs, etc., offer the BNPL facility in India. Some of these include the following.

1. Amazon Pay Later
2. Flipkart Pay Later
3. Tata Pay Later
4. Paytm Postpaid
5. Axio
6. ZestMoney
7. LazyPay
8. Simpl, etc.

How can new-to-credit customers use BNPL to build their credit score?

As mentioned earlier, the e-commerce marketplaces, fintechs, etc., offer the BNPL facility in partnership with banks/NBFCs. The bank/NBFC reports the repayment data of its BNPL customers to the credit information companies (CICs).

So, if you are a new-to-credit customer, the BNPL facility is an excellent way to start building your credit score and profile. With small monthly purchases through BNPL and their regular repayments, you will build a decent credit score over a period of time.

Your credit report will reflect the name of the BNPL company’s lending partner. For example, suppose you are using the Amazon Pay Later BNPL facility where the lending partner is IDFC FIRST Bank. In this case, your credit report will reflect IDFC FIRST Bank’s name as the lender.

What happens if the customer doesn’t pay the BNPL amount on time?

In the earlier section, we understood how to use BNPL to build your credit score and profile. However, if you don’t make the BNPL outstanding payment on time, it will ruin your credit score. The BNPL company will report any repayment delays to the CICs.

Any repayment delays will lead to a significant fall in the credit score. Also, the loan defaults will stay in the credit report for years until the borrower clears them. The loan defaults will make it difficult for the borrower to get new loans or credit cards in the future.

Should you use BNPL for building a credit score?

If you are a new-to-credit customer, you can start your credit journey with a smaller BNPL credit limit. You can buy monthly groceries and other regular products using the BNPL payment option. Usually, over a 6 to 9-month period, you will develop a decent credit score and profile.

Thus, BNPL can be your stepping stone to building a good credit score and profile. Once you build a decent credit score, you can approach banks directly for loans, credit cards, etc. It is important to note that the bank will consider other eligibility criteria along with credit score while processing a loan/credit card application.

Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached on LinkedIn.

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Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards, and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks, such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.