Does Klarna Affect Your Credit Score?

Updated 26 December, 2024

Yes, Klarna does affect your credit score. However, it wasn’t always this way. Only in the last several months has Klarna started to impact your credit score, and this has to do with the way usage has been reported to credit reference agencies. 

Here, we’ll explain why you may have heard Klarna doesn’t impact your credit score, why that’s no longer the case, and what you need to protect your credit score if you choose to use Klarna. 

Does Klarna Report to Credit Bureaus?

Yes—as of June 1, 2022, Klarna has reported users’ payments to two of the UK’s major credit bureaus, Experian and TransUnion. This comes as the Buy Now, Pay Later industry is facing intensifying scrutiny from consumer advocates.

This means that your Klarna payment information is reported to Experian and TransUnion and is included in your credit report.  

Does Klarna Build Credit?

Yes, Klarna can help build your credit score*. When Klarna began reporting user payments to Experian in June 2022, Experian said it would take about 12-18 months for this information to start being incorporated into credit scores. This means that if you’ve been using Klarna or another BNPL provider that reports to a credit reference agency, it could have started impacting your credit score as early as June 2024.

Experian said that including BNPL data in credit scores could help people access credit more affordably. This is because with nothing more than a soft credit check, BNPL providers like Klarna would offer users a way to build their credit profile when their credit history is too limited to access traditional forms of credit like a loan or credit card. 

*Klarna states that using their platform responsibly improves your payment history, which is the single-most important factor influencing your credit score. Given the statements made by Experian in 2022 about how long it would take for BNPL use to be included in credit scores, we have little reason not to believe Klarna’s statement. However, this also means that using Klarna can damage your credit score more easily.

Is Klarna Bad For Credit? 

Klarna can be bad for your credit score if you’re not careful. Now that your use of Klarna is reported to Experian and TransUnion like other forms of credit like credit cards, it can impact your score for better or for worse. If you maintain your payments, Klarna can build your credit score, but if you fall behind or miss payments, Klarna can hurt your credit score. 

It can have other impacts as well. Klarna and other BNPL purchases will show up in your total credit usage. This could lead to a scenario where you’re rejected a line of credit because your credit utilisation includes BNPL—and the hard credit check associated with that application would damage your score. That dip in your credit score from being rejected might not sound particularly meaningful, but it could potentially be the determining factor in securing a mobile contract, a rental unit, or other financial tools further down the line.

Additionally, you could seriously damage your credit score if you miss multiple payments for Klarna. Not only are missed payments detrimental to your credit score, missing multiple payments could lead to  a default being reported on your credit file. This is a disastrous blow to your credit score and credit report, and can make it even harder to qualify for credit products for the next six years.

FAQs About Klarna, BNPL, and How They Impact Your Credit

BNPL point-of-sale loan providers like Klarna are only growing more common. As their impact on your credit report and credit score grows, it’s only leaving Brits with more questions. Here, we answer some common ones.

What Information From Klarna is Included in Your Credit Report?

The information that credit reference agencies and credit bureaus receive from Klarna will be broadly similar to the information they receive from a bank or credit card provider. This includes details about:

• When a purchase was made
• The cost of the monthly payments
• The account’s balance
• The timeliness of repayments

Does Klarna Check Your Credit?

Yes, Klarna does check your credit. Specifically, they run soft credit checks. A soft credit check won’t impact your credit score whatsoever, unlike a hard credit check, which is pulled for traditional credit products like credit cards or personal loans. 

Klarna uses TransUnion and Experian to perform these credit checks. If you were denied access to Klarna during their affordability check process, looking into your credit score from those credit reference agencies would be a good place to start. 

Can Lenders See Your Buy Now, Pay Later Usage?

Yes, because your BNPL payment information is now available in your credit report, lenders can see that information if you apply for a form of credit with them. This information won’t impact your credit score for now, but the information included in your credit report could still impact a bank or lender’s decision to offer you a line of credit (and that can impact your credit score).

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What Should You Use: Klarna or a Credit Card?

Klarna has been positioned as an alternative to credit, but this hasn’t been completely accurate. However, with Klarna payments set to be incorporated into your credit scores within the next eight months, there’s renewed interest in whether BNPL is a viable alternative to credit cards. Although some BNPL services could be more beneficial for a user’s credit score, the same risks remain.

Some of these potential consequences are that:

• Buy Now, Pay Later services like Klarna can encourage unnecessary spending: By promoting low payment amounts, some Klarna users are convinced to make purchases they otherwise wouldn’t. When these payments start adding up, it can make your monthly budget rigid and unable to adapt to emergencies.
• You lack common consumer protections: The Consumer Credit Act protects consumers like you against certain things that are out of your control, such as a package getting lost or stolen. In these instances, credit card companies are required by Section 75 of the CCA to refund your purchase, but BNPL schemes aren’t regulated by the CCA and therefore don’t owe you that protection.
• Credit card interest still applies: Although Klarna doesn’t charge you interest, if you make the purchase using your credit card, you could still accrue interest if you don’t pay your credit card off on time.

Ultimately, using a credit card wisely will benefit you much more in the long run than Klarna. By making timely payments, using no more than 25% of your credit limit, and making payments in full, you’ll improve your credit score over time and avoid costly, negative marks on your credit report.

Risky Products Don’t Build Your Credit—Pave Does

Even when you make timely payments to Klarna, it won’t have a positive impact on your credit score. On the other hand, each credit card or loan payment establishes your payment history and builds your credit score over time. However, not everyone is eligible for credit cards or loans, which is why we made the Pave app.

With Pave, we report your timely payments to credit reference agencies to actively build your credit and monitor your upcoming bills to make sure you don’t miss payments. Building credit takes time, but it’s even harder to do when you have negative marks on your credit report like a collections account. To learn more about building credit the right way or get started building your own credit, check out the other resources on our blog or download the Pave app from the App Store or Google Play today.

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