In short: Buy now pay later accounts show up in your bank statements and, since the sector came under credit regulation, increasingly in your credit report. Lenders treat active accounts as a liability, using either your actual instalments or a percentage of the limit. Close every account, let the balances clear, and keep the closure confirmation before you apply.
There is no faster way to lose borrowing capacity for a small amount of money. A few instalment plans that cost you $380 a month can quietly remove tens of thousands of dollars from your maximum loan, and the accounts do it whether or not you are using them.
What changed, and why it matters now
Buy now pay later was for years outside the consumer credit regime, which is exactly why it grew so quickly. That has changed. Following the Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Act 2024, the National Credit Code was extended to buy now pay later contracts, and from 10 June 2025 providers have needed an Australian credit licence to offer them. ASIC issued Regulatory Guide 281 on low cost credit contracts in May 2025, setting out the modified responsible lending obligations that apply.
The practical consequence for a home buyer is straightforward: buy now pay later is now regulated credit. That means providers are credit licensees, applications and accounts are more likely to be reported to credit bureaus, and an assessor can increasingly see your accounts in the credit file rather than only in your transactions. The days of assuming a BNPL account is invisible are over.
How lenders treat buy now pay later
Policy varies between lenders and changes without notice, so we check the current position before you apply.
| Situation | What lenders commonly do |
|---|---|
| Active account with an outstanding balance | Counted as a liability, using either the actual monthly instalments or a percentage of the account limit |
| Active account, zero balance, not closed | Some lenders count a notional commitment based on the limit; others ignore it |
| Account closed, balance cleared, closure confirmed | Almost always disregarded |
| Frequent use across three or more providers | Read as a cash-flow risk indicator, not just a liability |
| Late fees or missed instalments in the statements | A significant negative, often treated like a dishonour |
| BNPL used for essentials such as groceries, fuel or utilities | Treated as a strong warning sign about affordability |
| A large BNPL balance used for the deposit or costs | Usually fatal; the deposit must not be borrowed |
The limit-based approach is the one people miss. It is the same logic lenders apply to credit cards: you could draw the full limit the day after settlement, so the exposure is the limit, not the balance. Where a lender applies that method, four accounts with $1,000 limits each are a $4,000 exposure even if all four are empty.
There is a second, less obvious effect. Buy now pay later instalments appear in your 90 days of transactions, so they also inflate your assessed living expenses. You can be penalised twice for the same spending: once as a liability and once inside the expense figure. See living expenses and HEM explained.
Worked example: what $380 a month costs you
Ella has three buy now pay later accounts, with combined limits of $4,000. Her instalments across the three currently average $380 a month.
- Scenario A: she applies as she is. The lender counts the $380 a month as a commitment.
- Scenario B: she closes all three, lets the balances clear, and applies eight weeks later. Nothing is counted.
At a rate of 6.00% p.a. assessed with the APRA buffer of 3 percentage points, the assessment rate is 9.00%. Over a 30-year term, $1 of monthly commitment removes about $124 of borrowing capacity.
$380 × 124 = about $47,100 of borrowing capacity.
Now add the second effect. Those instalments were also sitting in her 90-day transaction review, lifting her assessed living expenses. Say $150 a month of that spending was genuinely discretionary and stops when the accounts close:
$150 × 124 = about $18,600 more.
Total recovered: around $65,700, for closing three accounts and waiting two months. On a 5% deposit, that is the difference between a $500,000 budget and a $565,000 one in the same suburb. These figures are illustrative and every lender's calculator applies different assumptions. Run your own baseline through the borrowing power calculator.
What an assessor sees in your statements
Buy now pay later is one of the easiest things to spot in a transaction review, because the payee names are distinctive and the instalments are fortnightly and identical. From the credit side, three patterns stand out.
- Volume. Two accounts is unremarkable. Six is a file note.
- Purpose. Instalments to a supermarket, a fuel retailer or a utility, funded through a BNPL provider, tell the assessor that ordinary living costs are being smoothed with credit. That is a much bigger problem than the dollar amount suggests.
The related items an assessor is scanning for in the same 90 days are gambling transactions, undisclosed debts, dishonours and payday or small-amount credit contracts. Buy now pay later sits in that cluster, which is why it carries weight out of proportion to its size.
How to close BNPL accounts properly
Do this in order, and start at least eight weeks before you apply.
- List every account. Include the ones you have forgotten. Check your last six months of statements for provider names, and check your credit report, which you can obtain free from each credit reporting body once a year. See credit score and home loans.
- Pay out the balances in full. Not the minimum, the balance. A closed account with money still owing is still a liability.
- Close the account, not just the card. Deleting the app does nothing. Use the provider's account closure process.
- Get written confirmation. An email confirming the account is closed with a nil balance. Save every one.
- Wait for the credit file to update. Reporting is not instant. Two to eight weeks is a reasonable expectation, and lenders read the credit file as it stands on the day.
- Do not reopen one "just for this purchase". A new account opened between pre-approval and settlement can undo the entire exercise.
- Give your broker the confirmations up front. Attaching them to the application pre-empts the question rather than triggering a request for more information.
If the balances are too large to clear from savings, that is a different conversation. Consolidating them may help, but only if the arithmetic works; see the debt consolidation guide and debt consolidation before deciding. What you should not do is leave them running and hope the assessor is generous.
Where BNPL sits among your other liabilities
Buy now pay later is rarely the only issue on a file. The liability side of the calculation usually includes credit card limits, personal and car loans, HECS or HELP, and any ongoing commitments such as child support. Each of these has a lever attached to it, and they are set out in how to improve borrowing power.
The order of attack is generally: cut credit card limits first, because the limit is assessed rather than the balance; then close BNPL, because it is cheap to fix and carries a risk signal as well as a number; then pay out small loans with short remaining terms; then clean the statements. Four to six weeks of that work routinely changes an application's outcome more than any rate negotiation will.
Frequently asked questions
Does buy now pay later affect a home loan application?
Yes. Active accounts are treated as a liability, using either your actual instalments or a percentage of the account limit, and the instalments also appear in the 90 days of transactions used to assess your living expenses. Frequent use across multiple providers is read as a cash-flow risk. A few hundred dollars a month can remove tens of thousands of dollars of borrowing capacity.
Does BNPL show on my credit report?
Increasingly, yes. The National Credit Code was extended to buy now pay later contracts and providers have needed a credit licence since 10 June 2025, which brings them into the same regulatory framework as other credit providers. Whether a specific account and its repayment history appear depends on the provider's reporting. Either way, the instalments are always visible in your bank statements.
Should I close my BNPL accounts before applying for a home loan?
Yes, if you can clear the balances. Close every account, pay the balances to nil, obtain written closure confirmation and allow two to eight weeks for your credit file to update before you apply. Keep the confirmations to attach to the application. This is one of the cheapest and fastest improvements available to most applicants.
How long before applying should I stop using BNPL?
At least three months, because that is the window of transactions most lenders review. Ideally close the accounts eight or more weeks out so the balances are clear, the closures are confirmed and your credit file has been updated. Continuing to use buy now pay later while an application is being assessed is a genuine risk to the approval.
Talk to GNT Finance
Buy now pay later is the easiest problem on a home loan file to fix and one of the most expensive to ignore. Gorakh Timilsina read these statements from the credit side for years, so GNT Finance can tell you exactly what your last 90 days will look like to an assessor and what to close before it matters. There is no cost to you for our home-loan service in most cases. Book a free consultation or call 0426 403 703.
This page is general information only and not legal, tax or financial advice. Lender policy varies and changes without notice; we confirm the current position before you apply.
Written by Gorakh Timilsina
Founder, CEO & Senior Mortgage Consultant at GNT Finance. Gorakh started as a broker assistant, spent years as a senior credit officer assessing loan applications, and now helps Melbourne families get the right loan approved. English, Nepali and Hindi spoken.