Klarna lets you buy now and pay later, which makes it technically a form of credit.

The relationship between BNPL companies and your credit score got more complicated in June 2022, when Klarna started sharing UK BNPL purchases with Experian and TransUnion.

What Klarna is#

Klarna is a Swedish company offering an alternative to card payments, digital wallets and services like PayPal. The merchant pays Klarna a percentage of the transaction; customers pay no service fee.

At checkout, UK users have several options:

  • Pay now — the bank details connected to your Klarna account transfer the money to the merchant, leaving your account as soon as your bank processes it.
  • Pay in 30 days — Klarna sends an invoice with the amount and a deadline. You're notified by email, and can view outstanding invoices in your account.
  • Pay in 3 instalments — the first payment when you buy, then Klarna automatically takes the next two after 30 and 60 days.
  • Klarna financing — pay off over 6 to 36 months. Unlike the other options, financing charges interest.

You can also use the app to generate a one-time card, for stores that aren't set up to take Klarna directly.

Why Klarna can affect your score#

Your score is generated from your credit report, held by the three credit reference agencies.

Since June 2022, Klarna has reported user transactions and repayments to Experian and TransUnion. Previously it only reported data if you chose financing or missed a payment.

So lenders can now see that you use Klarna when they check your report — during a hard credit check for a loan or bank account, for instance.

That isn't necessarily a concern. Borrow what you can afford and repay on time, and the BNPL option appears on your record without lowering your score. It might even help slightly, since small timely payments build a positive repayment record.

1. Missed payments will lower your score#

Using Klarna won't necessarily hurt you. Missing Klarna repayments will.

Klarna reports late or missed payments to the credit reference agencies, and they stay on your file for six years.

Miss too many consecutive payments — often around six months' worth, though it can be less — and Klarna can begin proceedings to mark a default. That's a serious negative marker limiting your options for a new loan, mortgage, bank account or contract.

Which is why you should only use a BNPL provider when you're confident you can clear the debt within the agreed schedule.

Klarna financing works differently from the other options. Choose it and Klarna runs a hard credit check before agreeing to finance your purchase.

That check shows lenders detailed information about your last six years of financial history, which they use to judge how risky lending to you would be.

Because hard checks show you applied for new credit, they're recorded on your file — and a large number in a short time lowers your overall score.

The pay now and interest-free BNPL options involve only a soft credit search.

3. Repayments count as a monthly outgoing#

Apply for a loan or mortgage and your lender considers all your monthly outgoings when working out how much to lend and at what rate.

An outstanding Klarna balance counts as one of those outgoings, and can affect the deals you're eligible for.

Using Klarna without affecting your score#

Your orders and payments now show on your file with Experian and TransUnion, but you can still use the service safely.

  • Only buy what you can afford to repay. Spreading the cost over three months makes a large essential purchase — a replacement appliance, say — more manageable. If you know the payment at 30 or 60 days will be a struggle, postponing or choosing something cheaper beats risking a missed payment.
  • Pay on time, whether that's settling your Pay in 30 days invoice as soon as you're emailed, or keeping financing repayments current.
  • Track upcoming payments on the Pay in 3 option. Klarna's terms state the second and third payments are taken automatically. Insufficient funds could mean a missed payment recorded, or you slipping into your overdraft — either of which reports negatively.

Information on your credit file is visible to lenders for six years, so one missed Klarna payment can affect you for a long time.

The key things to remember#

  • Klarna has reported to Experian and TransUnion since June 2022.
  • Pay now, Pay in 30 days and Pay in 3 are interest-free; financing isn't.
  • Financing runs a hard check; the others use soft searches.
  • Missed payments stay on your file for six years.
  • Around six months of missed payments can trigger a default.
  • An outstanding balance counts as a monthly outgoing on loan and mortgage applications.
  • Pay in 3 takes payments automatically at 30 and 60 days — keep funds available.