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Does Klarna Affect Your Credit Score

Does Klarna Affect Your Credit Score? What You Need to Know

Klarna, a popular buy now pay later (BNPL) service, offers flexible payment options. However, using Klarna can also impact your ability to borrow money in the future. But how does Klarna affect your credit score? Here’s what you need to know to manage your finances effectively.

Key Takeaways

  • Klarna’s Impact on Credit Score: Klarna, a buy now pay later service, can affect your credit score. Timely payments can build a positive credit profile, while missed or late payments can negatively impact your score.
  • Klarna’s Payment Options and Credit Checks: Klarna offers various payment options, some of which may involve a hard credit check. These checks are recorded on your credit file and can affect your credit scores.
  • Managing Klarna Payments: To maintain a positive credit score, manage your Klarna payments carefully. Regularly check your credit report, make payments on time, and avoid exceeding your credit limit.

Does Klarna Affect Your Credit Score

What Is Klarna?

Klarna allows you to make purchases and pay for them over time. With various payment options, it’s a convenient way to shop. Klarna’s financing options require signing a regulated credit agreement. But, like any credit agreement, it’s important to understand how it can impact your credit history.

Soft and Hard Credit Checks

When you sign up for Klarna or make a purchase, a soft credit check is usually performed. This type of check does not impact your credit score. However, if you opt for Klarna’s financing options or make higher value purchases, a hard credit check may be conducted. Hard checks are recorded on your credit file and can affect your credit scores.

Klarna’s Payment Options

Klarna offers multiple payment methods. Pay Now lets you pay immediately at checkout. Pay in 3 allows you to split the cost into three interest-free instalments. Pay in 30 Days lets you pay the full amount within a month. For larger purchases, Klarna provides financing options that spread the cost over 6 to 36 months, involving a hard credit check. The Klarna Card, a Visa card, also requires a soft credit check.

Does Klarna Affect Your Credit Score

Impact on Your Credit Score

Using Klarna can have both positive and negative effects on your credit score. Making timely payments and keeping outstanding balances low can help build a positive credit profile. Conversely, missed payments, late payments, or unpaid balances can be reported to credit reference agencies and negatively affect your credit score. Additionally, unpaid purchases made through Klarna’s buy now pay later products can be reported to credit reference agencies, which can negatively impact your credit score.

Reporting to Credit Reference Agencies and Your Credit File

Credit agencies and credit reference agencies like Experian and TransUnion gather information about your credit history. Klarna shares details such as your payment history and any missed payments. This information is used to update your credit report, which is reviewed by other lenders.

Managing Your Klarna Payments

To avoid negatively impacting your credit score, manage your Klarna payments carefully. Always pay by the due date to avoid late fees. Monitor your Klarna account to ensure you don’t exceed your credit limit. Use the Klarna app or other tools to set payment reminders.

does klarna affect credit score

Consequences of Missing Payments

If you miss payments, Klarna may report this to the credit reference agencies, affecting your credit score negatively. Unpaid balances may be handed over to a debt collection agency, further damaging your credit profile.

Klarna and Regulated Credit Agreements

Klarna’s financing options fall under the Consumer Credit Act, making them a regulated credit product. This means there are protections for consumers but also responsibilities. Failing to meet these responsibilities can lead to a decline in your credit score.

does klarna affect credit score

Final Thoughts

Using Klarna and other BNPL services can be a great way to manage your cash flow, but it comes with responsibilities. By understanding how Klarna works and how it can affect your credit score, you can make informed decisions and maintain a positive credit profile.

Regularly check your credit report, make payments on time, and be mindful of your spending to ensure Klarna remains a useful tool rather than a financial burden.

FAQs

Does Klarna affect your credit score?

Yes, Klarna can affect your credit score. Using Klarna responsibly, like making payments on time, can positively impact your credit score, while missed or late payments can negatively affect it.

How does Klarna report to credit reference agencies?

Klarna shares information about your payment history and any missed payments with credit reference agency and credit reference agencies. This information is used to update your credit report.

Does using Klarna involve a credit check?

Klarna performs a soft credit check when you sign up or make a purchase. For financing options or higher value purchases, a hard credit check is conducted, which can impact your credit file.

Can Klarna improve my credit score?

Making timely payments and maintaining a low outstanding balance with Klarna can help build a positive credit profile, potentially improving your credit score.

What happens if I miss a payment with Klarna?

If you miss a payment, Klarna may report it to credit reference agencies, which can negatively impact your credit score. Unpaid balances may be sent to a debt collection agency.

Are there any hidden fees with Klarna?

Klarna generally does not charge hidden fees, but there may be late fees if you miss a payment. Always check the terms of your credit agreement.

How does Klarna financing work?

Klarna financing allows you to spread the cost of a purchase over 6 to 36 months. This involves a hard credit check and is considered a regulated credit product under the Consumer Credit Act.

Can Klarna affect my ability to get a mortgage?

Yes, if Klarna reports missed payments or high outstanding balances, it can negatively impact your credit score, which mortgage lenders consider when assessing your creditworthiness.

Do all Klarna purchases affect my credit score?

Not all Klarna purchases affect your credit score. Pay Now and Pay in 30 Days typically involve a soft credit check, which doesn’t impact your credit score, whereas financing options involve a hard credit check.

How can I monitor my Klarna account to protect my credit score?

Use the Klarna app to track your purchases and payment deadlines. Setting reminders and regularly checking your credit report can help you stay on top of your payments and protect your credit score.