If you have excellent credit
No, does PayPal credit affect your credit score? However, if you’re thinking about applying for a loan or other type of credit to purchase an item on PayPal Credit, keep in mind that doing so may affect your credit history.
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Request a credit line increase. As long as you have paid off your previous balance during each billing cycle, there is no reason why a requested CLI should affect your FICO scores negatively. By requesting an increase in their CL, users show their capacity to handle larger amounts of debt responsibly. This can be seen as another positive factor by most creditors when determining whether someone is eligible for additional lines of credit. Do I qualify? Even if you don’t use PayPal Credit frequently, having access to emergency funds is always helpful, especially when faced with unexpected expenses such as buying gifts or booking flights for business trips far away from home.
If you have average credit
You probably don’t think much about your credit score. After all, for most people, their score doesn’t do much—you can’t use it to rent an apartment or buy a house. But if you’re in a position where you might need a loan for a big purchase or loan, it’s worth understanding how credit scores work and what impact they have on your financial life. One little-known fact is that PayPal Credit—the company’s peer-to-peer lending service—could affect your credit score. In short: It won’t tank your score or cause any immediate problems but can affect certain types of loans in the future.
Here’s why that matters and what to do about it when using PayPal for purchases.
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- [In case you’re wondering whether bad credit affects your ability to find jobs, check out our recent coverage.]
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If you have poor credit
A credit score, or FICO score, is a three-digit number between 300 and 850 used to determine whether you qualify for loans and what interest rate you can expect. The lower your score, the higher your interest rate will be. But there are exceptions: Some people with excellent credit can get better rates than those with poor credit. Suppose you have an existing account that has been in good standing for six months or more, such as a student loan or mortgage. In that case, your lender may report your payment history to one of two bureaus—Experian and Equifax—and it may show up on your Experian credit report. And PayPal maintains its records on some accounts. So what do these reports mean for your score? It depends on which bureau receives them.
Generally speaking, your credit score goes up as positive information about you gets reported and down when negative information gets added. Because lenders typically report only positive information to one bureau but both negative and positive info to another, each time they update their records, you’ll likely see small changes in either direction—sometimes just a few points at most.