Online retailers are aggressively marketing a service called buy now, pay later (BNPL). Digital services such as Affirm and Klarna are among a growing list of digital services for consumers that are turning the traditional layaway model on its head — and now, potentially your credit score.

Layaway versus buy now, pay later

Traditional layaway is where the retailer holds the product for you while you make payments. Once you pay the total price, you receive the item. Many financial planners can get behind this model because the item is being purchased with your own available money and is not adding to any debt you may have.

In contrast, BNPL digital services give you immediate access to the product as you make payments for four months with 0% interest.

This type of instant service may be helpful to solve an emergency need, but it may also create credit score issues for people who use them too much.

New impacts to your credit score

Currently, BNPL activity is included in reporting to the three major credit agencies: TransUnion, Experian, and Equifax.

Why does this matter to you? In the eyes of a credit bureau, each time you use a BNPL service, you are opening and closing a credit account, for each separate purchase. If you use this service often, you are creating a potentially negative credit story for the major credit bureaus.

How? Credit scoring models reward you when you open a credit account and make timely payments, but penalize you for closing an account.

Think about this: Each time you use BNPL, you create and close a credit account. If you do this multiple times, those multiple account closures will lower your credit score under most current scoring algorithms.

Looking ahead: Evolving rules

For now, reporting to the credit bureaus is not standardized among the BNPL providers, so be sure to check your credit score from all three major credit agencies.

5 things to consider for buy now, pay later and your credit score:

1. Treat buy now, pay later services as any other credit or credit-like product; make good choices
2. Pay attention to how often you use buy now, pay later services, especially if your credit score is 700 or lower
3. Be sure to make payments on time
4. Do not open multiple buy now, pay later lines at the same time
5. Resist using buy now, pay later for impulse purchases

BNPL may be just the solution for your emergency need. However, it may pay off down the road to look at different options.