Affirm is a popular buy now, pay later app that allows consumers to split purchases into multiple installments over time. With Affirm, you can finance everything from routine expenses like groceries and gas, to large purchases like furniture, vacations, and even cosmetic procedures.
But can using Affirm actually help or hurt your credit? In this comprehensive Affirm review, we’ll take an in-depth look at how Affirm works, its pros and cons, fees, eligibility requirements, and most importantly – if and how Affirm can impact your credit score and report.
How Does Affirm Work?
Affirm is a point-of-sale financing option available at eligible online stores and in-store retailers. Instead of charging your purchase to a credit card that requires you to pay the balance in full, Affirm lets you split the cost into equal monthly payments over 3, 6, or 12 months.
Here’s how it works:
- Add an item to your online shopping cart or get ready to checkout in-store. Look for the Affirm financing option.
- Select Affirm at checkout. You’ll be prompted to enter some basic personal information.
- Affirm will perform a soft credit check and provide customized loan options within seconds. Choose your preferred terms.
- Your loan is approved immediately if eligible. Affirm pays the retailer upfront and you pay Affirm back in predictable installments.
It’s that easy! There are no hidden fees or surprises. You’ll know your monthly payment and loan terms upfront before completing the purchase.
Advantages of Affirm
Here are some of the main benefits of using Affirm:
- Predictable payments – You’ll know your exact monthly payment amount when choosing repayment terms.
- No interest – Some Affirm loans are 0% APR. This makes it an affordable financing option.
- Fast funding – Get approved and receive funds instantly at checkout.
- Flexible terms – Pick the ideal repayment schedule from 3-12 months.
- No fees – There are no origination fees, prepayment fees, or late fees.
- May improve credit – Affirm reports payments to credit bureaus which can help build credit history.
- Wide acceptance – Used at over 100,000 retailers from Peloton to Walmart.
Affirm Eligibility and Soft Credit Check
Affirm approves customers through a soft credit check that does not affect your credit score. They examine factors like:
- Income and employment
- Existing debts and expenses
- Credit history and utilization
- Public records, collections, and bankruptcies
As long as you have a fair credit score in the 600s and meet income and debt-to-income requirements, you should qualify for an Affirm loan. Approval is not guaranteed though.
Those with bad credit scores below 600 may not be eligible. Having no credit history can also disqualify applicants. Affirm may ask that you add a co-signer with better credit to strengthen your application.
Affirm Fees, APR, and Payment Terms
One advantage of Affirm is that there are no hidden fees. However, interest rates vary depending on the loan terms:
3 or 6 month loans – Typically 0% APR. You just pay the purchase amount divided by the loan term.
12 month loans – Range from 0-30% APR depending on credit. Interest is included in the monthly payments.
Longer terms – For purchases above $1000, special 24-48 month financing may be available at 0-30% APR.
While APRs are clearly disclosed before you complete a purchase, not everyone will qualify for the lowest rates. Those with excellent credit scores of 720+ are more likely to get 0% interest financing.
You’ll pay more in total with higher APR loans, but the convenience of predictable installments may be worth the extra costs for some consumers.
The Potential Impact of Affirm on Your Credit
One big question is whether Affirm can help or harm your credit profile. The answer depends on how you use it. Here are the potential credit impacts:
- On-time payments – Affirm reports your payment history to credit bureaus. Making all your payments on-time shows you can responsibly manage another line of credit.
- Credit mix – Affirm appears as an installment loan which adds variety to your credit report. Credit scoring models like to see different accounts like mortgages, credit cards, and installment loans.
- Lower utilization – Affirm keeps balances separate from your credit card balances. This can improve your credit utilization ratio.
- Builds credit history – Responsible use of Affirm accounts helps build your credit, especially if you have limited other credit history.
- Lowering the average age of accounts – Applying for new Affirm loans lowers your average account age which can slightly drop credit scores.
- Too many hard inquiries – While Affirm only does a soft check at first, if you apply for multiple loans in a short timeframe, Affirm may do a hard inquiry which can temporarily knock a few points off your score.
- Potential late payments – If you take on too much Affirm debt across multiple purchases and struggle to make the monthly payments on-time, your credit score could be damaged by late payments. Interest charges also begin accruing immediately on late Affirm payments.
Tips for Using Affirm Responsibly to Improve Your Credit
While Affirm can be risky if misused, responsible use aligned with your budget and existing debts can indeed strengthen your credit profile over time. Here are tips on using Affirm to maximize the credit benefits:
- Only use Affirm at 0% APR to avoid interest charges.
- Don’t take on more Affirm debt than you can comfortably handle each month. Add up all your installment payments before financing a new purchase.
- Set payment reminders and pay each installment early or on the due date to avoid late fees and credit damage.
- For the greatest credit mix benefits, use Affirm only for larger purchases you could not easily put on a credit card.
- Be mindful of hard inquiries – don’t open too many accounts rapidly.
- Consider adding a co-signer if your individual credit is poor.
Always make timely payments and keep Affirm balances low compared to your overall available credit limits across cards and other loans. Used prudently and sparingly, Affirm installment loans can strengthen credit through responsible use.
Pros and Cons of Affirm
Here is a rundown of the key advantages and disadvantages of using the Affirm financing app:
- 0% APR financing available
- On-time payments reported to credit bureaus
- No hidden fees or penalties
- Simple application process with fast approval
- Flexible 3 to 12 month terms
- Can use for large purchases
- Focuses on actual ability to repay, not just credit scores
- No sign-up bonuses or rewards
- Not accepted at all retailers
- Must budget to make on-time payments
- Late or missed payments hurt credit
- Too many new accounts lowers average age of credit history
- Higher APR loans accrue interest charges
- Requires a soft credit check
Who Should Use Affirm?
Affirm can be beneficial for consumers in certain situations:
- You need to finance an emergency expense or necessary purchase you can’t fully cover today
- You want to maintain liquid cash and not max out your credit cards
- Building credit history through on-time installment loan payments
- You qualify for 0% APR with Affirm but not through other lenders
- You have fair credit but can’t qualify for a credit card with a long 0% introductory APR offer
- You need installments to afford larger purchases without decimating your savings
Who Should Avoid Affirm?
On the flip side, here are cases where Affirm may not make financial sense:
- You have access to better financing options like 0% credit cards or personal loans
- You cannot comfortably budget the monthly payments
- You plan to carry credit card balances, so need to reserve credit availability
- You have great credit and qualify for the best rates on all types of financing already
- You are working on improving your credit score and want to minimize hard inquiries
Alternatives to Affirm
While Affirm is convenient at the point of sale, there are other ways to finance purchases that may be cheaper or better depending on your circumstances. Alternatives to consider include:
Credit Cards with Intro 0% APR Offers
Many credit cards offer new applicants 0% interest for 12 to 18 months on purchases and/or balance transfers. If you have good credit, you can pay off purchases over more than a year without interest.
Borrow a lump sum at a fixed rate and term to pay for any large purchase or consolidate debt. Interest rates vary based on income and credit scores, but the predictable payments help with budgeting.
Retailer Financing Plans
Some major retailers like Amazon, Walmart, Lowe’s, Best Buy, and Target offer their own financing programs. Retail cards tend to have high ongoing APRs, but may offer deferred interest promos similar to Affirm.
Buy Now Pay Later Apps
In addition to Affirm, apps like Afterpay, Klarna, PayPal Pay in 4, and Sezzle let you split purchases into 4 interest-free installments.
Layaway allows you to reserve items by putting down a percentage. You then pay off the balance over time and receive the items when paid in full. No fees or interest.
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FAQs About Affirm
Does Affirm do a hard or soft credit check?
Affirm only does a soft credit inquiry when you initially apply for financing. This soft check does not affect your credit score. However, Affirm may conduct a hard inquiry lowering your score slightly if you apply for multiple loans in a short period of time.
Can Affirm loans help your credit?
Yes, Affirm can help build your credit history by responsibly making on-time payments over several months. This shows lenders you can manage installment loan accounts. However, taking on too many loans at once or making late payments may damage your credit.
What credit score do you need for Affirm?
There is no posted minimum credit score for Affirm, but most approved applicants will have fair credit or better. Those with very poor credit below 600 are less likely to qualify without adding a co-signer. Excellent credit above 720 gives you the best chance of 0% APR offers.
Does Affirm check income?
Yes, Affirm considers your income, existing debts, and expenses during the application process to determine if you can manage the monthly payments. Providing pay stubs or income statements may help with approval. Higher incomes improve your chances.
Can Affirm loans be paid off early?
Yes, you can pay off an Affirm loan early with no prepayment penalty. This stops further interest from accruing. Paying loans off faster also maximizes the credit building benefits.
What stores offer Affirm financing?
Affirm is available at over 100,000 retailers from across categories like fashion, beauty, electronics, home improvement, sporting goods, and more. Some of the most popular stores using Affirm include Peloton, Walmart, Amazon, Target, Wayfair, Nordstrom, Exodus Travels, and West Elm.
The Bottom Line – Consider Your Options But Use Wisely
Overall, Affirm provides a legitimate option to finance larger purchases interest-free over 3 to 12 months if you qualify – particularly at the point of sale when needed. It offers a level of flexibility, transparency, and convenience that traditional credit cards cannot. But blind loyalty to any one buy now, pay later solution is unwise. Always consider alternatives like credit cards or personal loans and choose the best financing method carefully based on your budget and broader credit goals. If you do use Affirm, making consistent on-time payments is crucial to avoid headaches and build your credit effectively.