Will paying with Klarna now affect your credit score?

Popular buy now, pay later provider Klarna will start sharing its UK customers’ spending habits with credit reference agencies Experian and TransUnion this summer.

The payments and missed payments of millions of UK users of Klarna will become visible to other lenders from 1 June, the company has announced.

A little over a month after the 3 major credit reference agencies (CRAs) in the UK announced that they will start including data from consumers’ buy now, pay later (BNPL) debt in their credit reports, Klarna is taking the leap as the first BNPL provider to set a date, before widely anticipated regulation of the sector kicks in.

Why is Klarna reporting customer spending data?

With the growing popularity of BNPL and increasing concerns that users are not fully aware of the debt they are taking on from building up multiple lines of credit, Klarna has announced that it wants “to protect customers, provide the industry with greater visibility of BNPL use, and give UK consumers one less reason to use high-cost credit cards.”

What is buy now, pay later and how does it work?

BNPL is a payment service that allows you to spread the costs of purchased goods or services by paying in instalments.

Read more on BNPL in our guide.

When will Klarna start sharing the data?

Klarna will start reporting on its Pay in 30 and Pay in 3 orders made on or after 1 June, 2022, to both Experian and TransUnion. This will include purchases paid on time, late payments and unpaid purchases.

Klarna has said that any data relating to purchases made before 1 June 2022 will not be reported.

Will this affect credit scores?

Klarna says that the 2 CRAs – Experian and TransUnion – will need to make further updates to their scoring systems before BNPL transactions affect credit scores. But lenders will be able to see the transaction data and it’s likely that any late payments or unpaid purchases will have a negative impact on future lending. A history of paying for Klarna purchases on time could also have a positive effect. Lenders may use the data for assessing whether you can afford further debt, too.

“..this will give the financial industry greater visibility on UK shoppers’ use of Klarna’s BNPL products, help to improve affordability assessments, and means Klarna consumers who make payments on time can build a positive credit history, showing lenders they use credit responsibly,” the company says.

You can use our free tool to check your credit score and learn how to iron out any unwanted creases.

If you are already using Klarna or are considering using a BNPL service, it is always wise to check the small print, especially as this could now affect your credit history.