Many people receive and send money online through the use of Internet bank accounts. While some people will use accounts linked to offline banks, others will use accounts that exist only on the Internet. One of the most popular Internet financial services providers is PayPal. Millions of people use PayPal as a sort of online checking account into which they can deposit money and make payments. Using PayPal will not generally affect their credit scores.
PayPal accounts resemble checking accounts in that people can deposit money into them and then withdraw the money when needed. Although people do not write checks to their PayPal account, they can get PayPal debit cards. PayPal does not lend its customers money. These accounts are not lines of credit and do not allow people to take out loans. Therefore, they will not be listed on a person's credit report.
A credit report is a dossier of information that a credit reporting bureau uses to describe a person's credit history. When a person takes out or pays back a loan, this transaction appears on the credit report. Other kinds of financial accounts, such as checking accounts, savings accounts and Internet accounts, such as PayPal, are not on credit reports. Any item not included on a credit report will not affect a person's score.
A credit score depends on the items listed on a person's credit report. The score relies on a formula into which these items are entered. A PayPal account will not be on a person's credit report and will therefore not affect his credit. However, a lender may wish to know a prospective borrower's financial assets, including his online accounts, when he is determining if the borrower qualifies for a loan.
The only way that a PayPal account could influence a person's credit score would be if the person overdrew on the account and left a negative balance. While the person would have a chance to pay the account, if he failed to do so in a timely fashion, then PayPal might well report the debt to a credit reporting bureau, which would lead to a drop in the person's score.