Klarna has changed the way many of us shop online, making it easier to spread the cost without paying interest. With new rules coming for Buy Now, Pay Later services in the UK, it's worth understanding how it works — and what it does to your credit score.

What Klarna is and how it works#

Klarna is a BNPL service that breaks the cost of purchases into smaller, manageable payments. Three options are most common:

  1. Pay in 30 days — receive your item first, then pay within 30 days. You can schedule the payment in advance.
  2. Pay in 3 instalments — split the cost into three equal interest-free payments taken monthly, with the first at the point of order.
  3. Financing — a longer-term option working more like a traditional loan, over 6 to 36 months, with interest charged. Check the terms before committing.

Klarna is also available as a digital card for your Apple or Google Wallet, so you can use it in person as well as online. It works with all three payment methods above, and lets you shop abroad without exchange fees.

Does using Klarna affect your score?#

Here's where each option lands:

  • Soft searches. Applying to pay with Klarna usually triggers a soft search. These show on your credit report but don't affect your score.
  • Missed payments. Fall behind and Klarna may report it to the credit reference agencies, which will damage your score.
  • Longer-term financing. Choose financing and Klarna performs a hard search. This appears on your report and can influence your score. Lenders treat too many hard searches in a short period as a red flag — it suggests you're taking on too much credit, depending on it, or being rejected elsewhere.

Can Klarna build your score? Like other forms of credit, paying on time and only borrowing what you can afford could help over time. There's more in Klarna and your credit score.

New UK rules for BNPL#

BNPL has been largely unregulated in the UK. In October 2024 the government announced measures to protect shoppers from unmanageable debt:

  1. Affordability checks. Providers may soon have to run more in-depth checks that you can afford the repayments.
  2. Clearer terms. Agreements should become easier to understand, so you know exactly what you're signing up to.
  3. Complaint escalation. Customers would be able to take complaints to the Financial Ombudsman Service.

Good news for anyone using Klarna or other BNPL services — an extra layer of protection and transparency.

Is it a good option?#

Klarna is a handy tool for managing cash flow, but it isn't a free pass to overspend. Before clicking "Pay with Klarna", ask yourself:

  • Can I comfortably afford the repayments?
  • Do I understand the terms and any potential fees?
  • Could this affect my credit score, now or later?

The key things to remember#

  • Three options: pay in 30 days, three interest-free instalments, or financing over 6–36 months.
  • Only financing charges interest.
  • Standard options use soft searches that don't affect your score.
  • Financing triggers a hard search that does.
  • Missed payments can be reported to the agencies whichever option you chose.
  • The digital card works in store and avoids exchange fees abroad.
  • New rules will bring affordability checks, clearer terms and Ombudsman access.