Does Zilch Improve Credit Score or Ruin it? Fact Check

For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.

Are you curious about Zilch, the Buy Now Pay Later service, and its impact on your credit score? You’ve come to the right place. Each month, over 170,000 people visit our website for advice on these topics.

This article will guide you through:

Understanding what Zilch is and how it works.
The pros and cons of using Zilch.
Explaining what a credit score is.
The potential impact of using Zilch on your credit score.
Tips on managing debt and possibly writing off some debt.

In 2022, arrears on household bills increased by 68% from £1,739 to £2,920¹. So, it’s common for people to struggle with debt and worry about their credit score. You’re definitely not alone.

Don’t worry; we’re here to help you understand Zilch, credit scores, and how to manage debt.

How Does Zilch Work?

Zilch is a little different to other companies that provide BNPL credit.

Most notably due to the availability of the Zilch Mastercard, which means that the credit Zilch has provided you can be used almost anywhere that accepts Mastercard.

However, if you do use the Zilch Mastercard to make purchases, you have to pay the initial payment at the time of purchase. So that means you have to have 25% of the cost of the purchase ready to pay Zilch.

The payment schedule works like this:

You have to pay 25% of the cost of purchase at the checkout stage.
After two weeks, an instalment of 25% is taken.
After 4 weeks, a further 25% is repaid.
The final 25% is paid at week 6.

Zilch only performs a soft credit check on your credit file before granting you credit.

This will have no impact at all on your credit score. All that Zilch is doing is verifying your identity.

Then based on the information Zilch gets back from your credit file, it will do its own calculations on how high of a credit risk you are.

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Zilch Pros and Cons

Because ZIlch is such a different take on the whole buy now pay later idea, it is difficult to judge whether it is better or worse than its competitors.

To help with this, we compare the pros and cons of Zilch in the table below.

Pros	Cons
Simple 4 instalments buy now pay later credit.	Some outlets charge £2.50 to use Zilch as payment.
Zilch doesn’t charge any interest at all.	Missing a Zilch payment can damage your credit rating.
If you want to settle up early, there are no penalty fees.	Payment plans are limited to 4 x bi-weekly instalments.
If you are granted the Zilch Mastercard, you can use it almost anywhere.	You cannot suspend payments back to Zilch, even if you are waiting for an outlet to refund you.
You won’t be charged a fee for late or missed payments.	Zilch customer service has many bad reviews, and there have been some nightmare stories about poorly managed accounts.

How a debt solution could help

Some debt solutions can:

Stop nasty calls from creditors
Freeze interest and charges
Reduce your monthly payments

A few debt solutions can even result in writing off some of your debt.

Here’s an example:

Situation

Monthly income	£2,504
Monthly expenses	£2,345
Total debt	£32,049

Monthly debt repayments

Before	£587
After	£158

£429 reduction in monthly payments

If you want to learn what debt solutions are available to you, click the button below to get started.

Get started

Can It Have an Impact on Your Credit Score?

If you are late paying or miss paying Zilch repayments, these will be recorded in your credit file, and will have a detrimental impact on your credit score.

Furthermore, if you stop paying Zilch entirely, the company will likely pass your debt on to a collection agency such as Lowell Financial or PRA Group.

Once debt collectors are handling the debt that you owe Zilch, it is likely that legal proceedings could begin if you don’t pay the debt.

This could see you facing a County Court Judgment (CCJ) being issued against you.

This would have a very serious impact on your credit score. It is therefore vital that you don’t miss the repayment of your Zilch BNPL debt.

Debt Solutions Comparison

If you’ve missed a payment and are struggling with debt, don’t worry. There are different debt solutions available to help you minimize the impact on your credit score.

These are:

Debt Solution	Description	Formality	Debt Type	Debt Range	Legally Binding	Impact on Credit Score	Asset Risk	Monthly Payment	Duration	Creditor Agreement Required
Debt Management Plan (DMP)	Agreement to pay back non-priority debts in one monthly payment.	Informal	Non-priority debts	Any amount	No	Yes	No	Varies	Varies (until debt is paid)	No (but creditors must be informed)
Individual Voluntary Arrangement (IVA)	Agreement to pay back all or part of your debts over a set period.	Formal	All or part of debts	Usually over £10,000	Yes	Yes	Possible	Fixed	Fixed period, usually 5-6 years	Yes (75% by debt value must agree)
Debt Relief Order (DRO)	Freezes debt for a year and be potentially written off.	Formal	Non-priority debts	<£20,000 debt	Yes	Yes	No	None during freeze	12 months	No (court approval needed)
Bankruptcy	Legal status for those who cannot repay debts, potentially writes off debts.	Formal	Unmanageable debts	Any amount, typically high debt	Yes	Yes	High	None during bankruptcy	Usually 12 months, then discharge	No (court process)
Consolidation Loan	Taking out a new loan to pay off all existing debts.	–	Multiple debts	Based on loan amount	Varies	Yes	Depends on loan type	Fixed	Depends on loan terms	No
Payment Holiday	Temporary relief or reduced payments offered by creditors.	–	short-term financial difficulties	Any	No	Yes	Low	Reduced or paused payments	Break of up to 6 or 12 months, depending on circumstances, payment history, and creditor’s policy.	No
Informal Negotiation	Direct negotiation with creditors for reduced payments or extended terms.	–	All debts	Any	No	Possible	No	Negotiable	Until agreement terms are met	No
Statutory Debt Repayment Plan (SDRP)	Plan to repay debts over a reasonable time, with protections from creditor action.	Formal	All debts	Varies	Yes	Yes	No	Fixed	Varies, based on ability to pay	Yes
Equity Release	Homeowners release equity from their home to pay off debts.	–	Debts of homeowners, typically older individuals aged 55+	Varies and depends on property value	Yes	Yes	Asset (home) is used as collateral	Varies	8-10 weeks timeframe from application to fund disbursement. Lifetime; repaid on house sale/death.	No

References

StepChange Personal Debt Statistics in Scotland 2022