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

Core Insights - The report by Paizabazaar highlights the growing trend among young individuals, particularly Gen-Z, to build and maintain good credit scores, with 25% of participants aged 18 to 28 having an average credit score of 742 [1][2]. Group 1: Understanding BNPL - Buy Now Pay Later (BNPL) is a short-term financing option that allows users to purchase products or services on credit, with the merchant receiving payment from the BNPL provider [4]. - BNPL facilities are typically offered by e-commerce platforms, fintech companies, and banks through partnerships with lending institutions [6][12]. - Repayment options for BNPL vary, with some providers offering the choice to pay the full amount next month or through EMIs over 3 to 12 months, with no interest for full repayment [7][8]. Group 2: Building Credit with BNPL - New-to-credit customers can utilize BNPL as a means to establish their credit score, as repayment data is reported to credit information companies [13][14]. - Regular repayments through BNPL can lead to an increase in credit limits, allowing for larger purchases over time [11]. - A good credit score developed through BNPL can facilitate access to traditional loans and credit cards in the future, although banks will consider additional eligibility criteria [19]. Group 3: Risks of BNPL - Failure to repay BNPL amounts on time can significantly harm an individual's credit score, as delays are reported to credit information companies [16][17]. - Loan defaults can remain on credit reports for years, complicating future borrowing opportunities [17].