PayPal Pay Monthly does not automatically report to credit bureaus, so it usually will not help or hurt your credit score on its own
PayPal Pay Monthly is a buy now, pay later service that lets you split a purchase into installments without using a credit card. Because PayPal does not report most Pay Monthly transactions to the three major credit bureaus — Equifax, Experian, and TransUnion — making on-time payments will not build your credit history the way a credit card payment would.
However, if you miss a payment or fall behind, PayPal can report the delinquency to credit bureaus, which will damage your score. The risk is real even though the benefit is not: you get the downside of a missed payment without the upside of a paid one.
Your credit score depends on payment history, amounts owed, length of credit history, credit mix, and new credit inquiries. PayPal Pay Monthly touches only one of these — payment history — and only when something goes wrong.
Key Takeaways
- On-time PayPal Pay Monthly payments do not report to credit bureaus, so they will not improve your credit score.
- Missed or late PayPal Pay Monthly payments can be reported to credit bureaus and will lower your score.
- PayPal may perform a soft credit check when you sign up for Pay Monthly, which does not affect your score, but some lenders do a hard pull that does.
- If you are trying to build credit, a credit card with on-time payments will help your score more than PayPal Pay Monthly will.
- Defaulting on PayPal Pay Monthly can lead to collection accounts, which stay on your credit report for seven years.
When PayPal Pay Monthly does a credit check
When you first set up PayPal Pay Monthly, PayPal may check your credit. The type of check matters: a soft inquiry does not affect your score, but a hard inquiry does — usually by a few points.
PayPal typically performs a soft inquiry, which you cannot see on your credit report and does not lower your score. However, some users report that PayPal has done a hard pull instead. Hard inquiries stay on your report for about a year and can drop your score by 5 to 10 points, though the impact fades over time.
You can ask PayPal which type of inquiry they performed by contacting their customer service. If you are concerned about hard inquiries affecting your score, space out applications for new credit products by at least a few months.
How missed payments hurt your score
If you miss a PayPal Pay Monthly payment, PayPal will likely send you a reminder. If you continue to miss payments, PayPal reports the delinquency to credit bureaus after 30, 60, or 90 days — the exact timing depends on PayPal's reporting schedule.
A single late payment can lower your score by 100 points or more, depending on how high your score was before. The damage is worst if your score was already good; a late payment on an excellent score hurts more than a late payment on a fair score.
Late payments stay on your credit report for seven years. Even after you pay off the balance, the late payment record remains and continues to drag down your score, though its impact weakens over time.
What happens if you default on PayPal Pay Monthly
If you stop paying altogether and do not respond to PayPal's collection efforts, PayPal can send your account to a third-party debt collector. Once a debt collector takes over, the account may be reported as a collection account on your credit report.
A collection account is one of the most damaging items on a credit report. It can lower your score by 100 to 150 points or more and will make it much harder to borrow money, rent an apartment, or get approved for a credit card. Collection accounts stay on your report for seven years from the date of first delinquency, even if you pay the debt later.
If you fall behind on PayPal Pay Monthly, contact PayPal when ready to discuss a payment plan or hardship options. Paying before the account goes to collections is far better for your credit than paying after.
PayPal Pay Monthly versus a credit card for building credit
If your goal is to build or improve your credit score, a credit card is a better tool than PayPal Pay Monthly. Credit card issuers report all payments — on-time and late — to credit bureaus, so every on-time payment strengthens your credit history.
A secured credit card, which requires a cash deposit, is often easier to get approved for than an unsecured card and reports to all three bureaus. Using a secured card responsibly for six to twelve months can help you may have access to for a regular credit card later.
PayPal Pay Monthly is useful for spreading out a large purchase without interest, but it should not be your primary tool for building credit. If you want to use both, make sure you can afford both the PayPal payments and any credit card payments you take on.
How to protect your score while using PayPal Pay Monthly
Set up automatic payments from your bank account to PayPal so you never miss a due date. PayPal Pay Monthly installments are usually due on the same day each month, and automatic payments remove the risk of forgetting.
Before you start a PayPal Pay Monthly plan, make sure you can afford all the installments. If your income is unstable or you are already stretched thin with other debts, a buy now, pay later plan may not be the right choice.
Keep your PayPal account and contact information up to date. If PayPal tries to reach you about a missed payment and cannot, they are more likely to escalate the debt to a collector. Responding quickly to payment reminders gives you time to catch up or negotiate.
What to do if a PayPal Pay Monthly payment is reported as late
If a late payment has already been reported to your credit report, you have a few options. You can contact PayPal and ask them to remove the late payment report if there were extenuating circumstances — for example, if the payment failed due to a system error on PayPal's side.
PayPal is not required to remove accurate late payments, but they may do so as a goodwill gesture, especially if you have a long history of on-time payments. Send a written request explaining the situation and ask for reconsideration.
If PayPal declines, you can dispute the late payment with the credit bureau that is reporting it. File a dispute through the bureau's website or by mail. The bureau will contact PayPal to verify the information; if PayPal cannot prove the payment was late, the bureau may remove it.
Frequently Asked Questions
Does PayPal Pay Monthly show up on my credit report?
PayPal Pay Monthly accounts do not appear on your credit report unless you miss a payment. On-time payments are not reported, so the account itself stays invisible to credit bureaus. Only delinquencies and collection accounts show up.
Can I use PayPal Pay Monthly to build credit?
No. Because on-time payments are not reported to credit bureaus, using PayPal Pay Monthly responsibly will not improve your credit score. A credit card or secured credit card is a better choice if building credit is your goal.
How long does a PayPal Pay Monthly late payment stay on my credit report?
A late payment stays on your credit report for seven years from the date you first missed the payment. The impact on your score weakens over time, but the record remains for the full seven years.
What is the difference between a soft and hard credit inquiry?
A soft inquiry does not affect your credit score and does not appear on your credit report. A hard inquiry can lower your score by a few points and stays on your report for about a year. PayPal usually does a soft inquiry, but you can confirm by asking their customer service.
If I pay off my PayPal Pay Monthly balance, will the late payment disappear?
No. Paying off the balance does not remove a late payment from your credit report. The late payment record stays for seven years regardless of whether the debt is paid. However, paying the balance does prevent the account from going to collections, which would cause additional damage.