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Does Zip (Formerly Quadpay) Build Credit?

Tools like Zip let you pay less today, which is often tempting. But how do they impact your credit and overall finances?

October 13, 2022

Buy now pay later services have taken the world by storm over the past few years, and Zip (formerly Quadpay) is one of the leading providers. The service is popular for allowing people to split big purchases into smaller, more manageable payments, all without charging interest. But does Zip build credit or affect your credit at all?

We’ll explain everything you need to know about Zip and how the service works, along with the impact it has on your credit score and whether it’s a good idea to sign up.

How Zip works

Zip is a buy now pay later (BNPL) lender, just like Afterpay, Affirm and Klarna.

When using Zip, you can split a purchase into multiple interest-free payments instead of paying the full amount from the get-go.

To use Zip as a payment method, you need to download the app and link your credit card or debit card. It accepts Visa, Mastercard, Discover and American Express. 

To sign up, you must meet the following eligibility requirements:

  • Be a U.S. resident

  • Be at least 18 years old

  • Have a working phone number

  • Provide a valid address

You’ll need to provide your date of birth, personal details and sometimes identity documents. Zip does use factors associated with your credit report to decide whether to accept your application and how much credit it is willing to give you, but it isn’t transparent about how it goes about the process.

Making purchases

When you want to make a purchase using Zip (either online or in-store), you need to pay through the Zip app. You’ll get a virtual card number for one-time use, which you need to use for payment. You can then link this to Apple Pay or Google Pay for in-store purchases or enter it at checkout for online stores. 

Then, as long as a retailer accepts Visa, you can use Zip.

There’s a minimum purchase amount of $35, but the maximum payment amount will vary between applicants, just as credit card lenders give everyone a different credit limit. Accounts have a limit between $350 and $1,000, although they can go as high as $2,000 for some.

Zip splits your purchase into four parts, which you’ll pay over six weeks. You must pay the first one upfront, while the next three payments will be taken automatically. Although payments are interest-free, you will need to pay a $1 platform fee for each transaction, plus extra fees for late payments or account holding if you have a balance.

We’ve been focusing on Zip Pay here, which is Zip’s flagship product. However, it actually offers two services. The other is Zip Money, which has a higher credit limit (up to $5,000) and gives you a line of credit rather than offering a BNPL service.

But does Zip (formerly Quadpay) affect your credit?

Does Zip (formerly Quadpay) build credit?

To understand the impact of something like Zip on your credit score, you need to know the factors that affect credit scores in the first place.

First of all, there are a few different credit scores. The two main agencies, FICO and VantageScore, have various models they use to compile scores. And to make matters even more complicated, the three major credit bureaus (Experian, Equifax and TransUnion) may receive slightly different data from lenders.

However, FICO focuses on the following factors when determining your score:

  • Payment history (35%)

  • Amounts owed (30%) 

  • Length of credit history (15%)

  • Credit mix (10%)

  • New credit (10%)

Now, we just need to figure out how these factors are affected by BNPLlenders like Zip.

Payment history

The most important factor in determining credit scores is payment history. Generally, Zip does not report information about your payments to credit bureaus, which means that on-time payments won’t build your credit and late payments won’t hurt your credit. 

There’s one exception, however. If your account ends up going to collections, Zip may report it. While generally your late or missed payments won’t affect your credit score, you’ll still face fees that can negatively affect your finances.

Given that Zip doesn't report your information to credit bureaus in most circumstances,  your account also won’t directly affect your credit score through the channels of amounts owed, length of credit history or credit mix. 

But there’s still one more factor to consider.

New credit

When you apply for new credit, it can affect your credit score if the lender carries out a hard credit check, meaning that it requests information from a credit bureau. Too many hard credit inquiries can hurt your credit score, as it suggests you have a strong need for credit and are therefore less likely to make on-time payments.

Zip states that it only performs a soft credit check (not a hard check) on applicants, so applying for an account with the service won’t impact your score.

So, does Zip (formerly Quadpay) build credit? No. But in most cases, it also won’t harm your credit.

Should you use Zip?

We’ve established that Zip won’t impact your credit as long as your account doesn’t go into collections. But that alone isn’t necessarily a good-enough justification for using a BNPLlender.

For one, we’ve seen that Zip charges late fees and fees for holding a balance on your account, meaning that you could end up paying more than you initially owed. As with credit cards, this can lead to problems later down the line.

In the short term, a few small fees and an outstanding balance might not seem like a huge deal. But if you’re frequently using a BNPL service to make purchases, things can get out of control and you may lose track of what you owe or how many things you’ve bought. 

Buying a $100 pair of shoes and paying Zip $25 every two weeks? Not a huge deal. But if you buy 10 $100 pairs of shoes and owe $250 every two weeks, that’s a stressful situation that many people can’t sustain or afford.

There are also some other downsides of BNPL services like Zip. They make the returns process more complex because you’re dealing with a third party. There’s less regulation, and you may need to contact both the BNPL service provider and the retailer to get your money back.

Alternatives to BNPL

Many people like BNPL services because they budget for them. But if you think ahead, you can achieve the same thing by budgeting yourself.

For instance, instead of using Zip to break a $200 payment down into four payments of $50, you can plan the $200 expense a couple of months in advance to ensure you can save up the money.

As for building your credit, there’s no quick fix. However, you shouldn’t use “building credit” as a reason to take on a loan. Instead, one of the best things you can do is work on paying off any outstanding debt you have. If you have a credit card and want or need to use it, only put a small amount on it each month that you know you’ll be able to pay off before the due date. 

You can also build credit without a credit card by simply paying your bills each month.


Think before you spend

It can be useful to use a BNPL service for interest-free installments, but does Zip (formerly Quadpay) affect your credit? You might be able to miss a few payments without it affecting your credit score due to the lack of reporting to the credit bureaus, but if you let your account go into collections, it could reflect poorly on your credit score. It’s best to consider other payment options to take care of your personal finances. 

Instead of using a service like Zip, focus on paying off your current debt to build credit. Consider using the Tally†credit card repayment app. It pays off your higher-interest credit card debt with a lower-interest line of credit to help you gain control and make your payments each month.

To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.