Does Klarna affect my credit score?

Are you sensible with your purchases and only buy what you can afford?

Or do you like to buy now, pay later and enjoy the luxuries of life?

Klarna is one of the most popular ways to shop. And, with over 150 million customers with 20,000+ partner stores, it doesn't look like it’s going to disappear from our selection of checkout options any time soon. 

It’s super effective, easy to use and allows you to spread the cost or postpone the payments until you can afford it. 

However, a few questions have been raised about the effects it can have on users' credit scores and if it will impact them when trying to get personal loans and mortgages. 

Today we’ll debunk the myths surrounding Klarna payments and whether they can boost or harm your credit score.

Klarna: What you need to know 

Klarna is a service that offers flexible payment options like:

• Pay in 4 interest-free payments 

• Pay the full amount in 30 days 

• Pay over time 

Also known as Buy Now Pay Later (BNPL), Klarna offers multiple options to suit a variety of budgets and lifestyles. 

Simply click ‘pay with Klarna’ at checkout on participating stores and select the option that applies to you. 

The relationship between Klarna and your credit score 

Sites like Klarna have the power to positively or negatively impact your credit score, depending on how you manage your repayments. Making payments on time shows potential lenders that you can manage your money, implying financial responsibility. 

However, if you fail to make the payments on time, using Klarna can negatively impact your credit report, making it much harder to get mortgages, and be approved for credit cards and other types of loans in the future. 

In fact, Klarna has stated that users can actually build their credit history using their BNPL services, and will report this use with credit reference agencies (CRAs) to protect their customers and give greater visibility of BNPL use. Klarna reports purchases paid on time, late payments and unpaid purchases on Pay in 30 and Pay in 3 orders made after 1st June 2022 to Experian and TransUnion. 

This ultimately means customers can show lenders they use credit responsibly and build their credit score if they make payments on time. 

How to use Klarna responsibly 

Klarna is a great way to shop. It allows you to try before you buy and means you can spread the cost of bigger investments into more manageable payments. However, it’s recommended you only use it for lower-cost purchases.

Sifted reports that shoppers are likely to spend 20% more when using BNPL services, and online in general, but this could bite them in the back when it comes to paying the bill. 

To use Klarna safely without damaging your credit history, you should be cautious of buying more expensive items and remember that you do have to pay the full amount back. Set up reminders when payments are due and don’t rely on it to build your credit score. 

Risk-free ways to improve your credit score 

While Klarna can boost your credit score when used responsibly, there are much more effective methods, including a SIM card from the only network that boosts your credit score - Boshhh!

Developed with those who have had credit issues in the past in mind, our SIM cards are designed to not only give you access to the UK's most reliable network (Equifax and EE) but also boost your credit score, with the advice and support of our experienced and knowledgeable team. 

Boost your credit today and enjoy your newfound financial freedom.