Buy now pay later (BNPL) is a relatively new way to shop online and in-store. Over the last few years, millions of consumers have used Klarna, Laybuy, and Clearpay to quickly buy the items they want, without having to pay upfront.
While these services can certainly be used responsibly, there’s a lot of confusion over how they work and whether they can impact your finances in the future.
For example, do you need a good credit score for Klarna and how does it work? Does Klarna perform a credit check before approving you? What are the payment options? Read on for answers to these questions and more.
How does Klarna work?
Klarna offers buy now pay later payment plans for online and in-store purchases.
If you opt to use Klarna, you can take home or order the things you want, even if you don’t have the money for them straight away. You’ll get a choice of payment options with terms ranging from 30-days to three separate payments.
Some people use Klarna to buy items they need in the lead up to payday, while others use it to try on several items of clothes in different sizes, without having to pay hundreds of pounds and wait for a refund. In this case, you only have to pay for the items you decide to keep.
If you’re good at managing debt responsibly, Klarna can be a useful way to borrow money without having to pay interest. If you often forget when payments are due or your income is unpredictable, it can lead to debt problems over time.
Do I need a good credit score for Klarna?
Klarna doesn’t set a minimum credit score to qualify for its finance products.
However, Klarna may look at your credit report as a whole before making a decision. Klarna’s website says: “When a credit check is performed, we verify your identity using the details you provided and we look at information from your credit report to understand your financial behaviour and evaluate your creditworthiness.”
If you’ve used Klarna before, paying on time can improve your chances of getting approved again. Klarna explains: “History of positive behavior as a Klarna customer can improve your chances of being approved, so ensure to not miss a payment.”
Will using Klarna affect your credit score
Your credit score won't change if you use Klarna. But other lenders can look at your credit file and see things like missed payments, late payments, and unpaid balances.
Whilst using Klarna's buy now pay later payment option, a good history can be built by always making payments on time.
Does Klarna perform a credit check?
Klarna may carry out a credit check before deciding whether to approve your purchase or not.
In some cases, they’ll perform what’s known as a ‘soft’ search. This won’t show up on your credit report and it won’t affect your score. In other cases, they’ll perform a ‘hard’ search. This will affect your score and will be visible to other lenders when they look at your credit file.
Hard searches apply to most types of credit, whether you’re applying for a credit card or a personal loan.
These credit searches form part of Klarna’s affordability checks. The process is designed to confirm your identity and assess your past financial behaviour.
The type of credit check that will be carried out will depend on the payment option you choose.
Klarna Pay In 3 - soft credit search
‘Pay in 3’ allows you to spread the cost of your purchase into 3 interest-free installments.
The first payment is made when you make your purchase and the remaining instalments are spread 30 days apart from one another.
A soft credit check will be carried out in this case. It won’t be visible to other lenders and therefore won’t impact your credit score.
You must make the payments on time. Repeated failed payments could lead to your debt being passed over to a debt collection agency. This is likely to be recorded as a default on your credit report and this could make it more difficult to borrow money in future.
Klarna Pay In 30 Days - soft credit search
‘Pay in 30 days’ lets you receive your order quickly but pay for it up to 30 days later, without any interest or fees. Pay in 30 days involves a soft credit check to ensure affordability, meaning lenders won’t see it when they look at your credit report.
With the help of the Klarna app you can pay off the balance early or extend the due date if necessary.
When the store ships your order, you’ll get an email from Klarna outlining your payments.
You’ll then be able to see purchases and payment information in the app. Alternatively, you can log into your account on the Klarna website. Downloading the Klarna app could make it easier to stay on top of your account and avoid missing any payments.
Missed payments can damage your credit score and make it harder to get credit in future.
Klarna Financing - hard credit search
Klarna’s ‘Financing’ option is a longer term credit product. A hard credit search will be performed for any shoppers who pass the initial eligibility checks. This will leave a record on your credit report that is visible to lenders. It will also have an impact on your credit score.
Financing is a regulated credit product and is designed for higher value purchases. Klarna says it’s similar to other traditional finance products where, during the application, you must sign a regulated credit agreement.
When you use Klarna’s Financing option, it will share your borrowing details with credit referencing agencies on a monthly basis.
These details will include your outstanding balance, along with any missed payments or special arrangements.
If you pay off the money you owe on time and in full, this should have a positive impact on your credit score. It can also make it easier to obtain personal loans, car finance deals and mortgages in future.
How to improve your credit score for Klarna approval
There are a number of ways to improve your credit score and increase your chances of getting approved. It can take a long time to build credit, but with patience and consistency, you can improve your score and boost your chances of borrowing in future.
Pay existing debts on time and in full
If you have any existing debts such as personal loans, credit cards or store cards, make sure you pay them off on time and in full each month. This demonstrates that you’re a responsible borrower and can manage debt well.
Register to vote
Whether you vote or not, registering on the electoral roll can positively influence your credit score. It can also make it easier for lenders to confirm your identity and address.
Klarna vs. Credit Cards
Klarna's interest-free framework without any monthly fees might save you money compared to credit cards.
Klarna makes most of its money from fees that retailers pay them.
In most ways, credit cards and Klarna work in the same way:
You can buy something now and pay for it later.
If you don't pay on time, it can damage your credit score.
Widely accepted as a form of payment.
However, just like a credit card, Klarna will have additional fees if you make late repayments.
These fees may be slightly cheaper in comparison with typical credit cards.
It's also not wise to rely on Klarna to make purchases which otherwise you wouldn't be able to afford.
Don’t apply for several types of credit at once
If you’ve been rejected by Klarna, try not to apply for new forms of credit straight away. Submitting several credit applications in a short space of time can harm your score, especially if you’re rejected. Try to wait another 3 to 6 months before applying again.
Buy now pay later services may seem confusing, but by weighing up your options and using them responsibly, they can be an affordable way to borrow.
Make sure you’re able to manage your existing expenses and debts before applying for any new lines of credit. Failure to keep up with Klarna payments can harm your credit score.
What does your credit score need to be for Klarna? ›
Klarna doesn't set a minimum credit score to qualify for financing. Actually, it's possible to get credit with no prior history. If you choose to four interest-free installment payments, the company may conduct a soft credit pull. This does not hurt your credit score.Is Klarna hard to get accepted? ›
Klarna does not approve 100% of all orders and our aim is to support responsible, ethical, and sensible spending habits. We understand that it can be frustrating to be declined having been approved in the past. Our approval process, however, helps Klarna responsibly offer our services to our customers.Why do I never get accepted for Klarna? ›
Different factors, such as missed or delayed payments or reported financial hardship can lead to being blocked from further using Klarna. We understand that it can be frustrating to be declined for purchase after being approved in the past.Is Klarna a hard or soft credit check? ›
Klarna performs a soft credit check which does not affect your credit score and will not be visible to other lenders when: Deciding to Pay in 4.Does Klarna approve everyone? ›
Klarna does not approve 100% of all orders and our aim is to support responsible, ethical, and sensible spending habits. We understand that it can be frustrating to be declined for purchase after being approved in the past. However, our approval process helps Klarna responsibly offer our services to our customers.Can anyone get accepted for Klarna? ›
Be at least 18. Have a valid bank card/bank account. Have a positive credit history. Be able to receive verification codes via text.Can I use Klarna with no credit score? ›
Use of our Financing product is dependent on a full credit check, a customer's previous credit history and other factors are reviewed. Due to this product being a regulated product where a formal credit agreement is taken out, this will be visible on a customers credit file and may impact a customer's credit score.What is the downside of Klarna? ›
While Klarna does not report positive repayment of its Pay in 4 loans to the credit bureaus, if you miss payments and fall behind, it may negatively affect your credit score. Charges late fees. While Klarna does not charge interest on its Pay in 4 loans, it will charge late fees if you miss a payment.Does Klarna look good on credit score? ›
Using Klarna will not affect your credit score. However, information such as payment holidays and existing, late and unpaid balances is visible on your credit file to other lenders. Making repayments on time consistently will help build a positive history when using our payment options.How do I get approved for Klarna again? ›
- Make sure you are old enough. You need to be at least 18 in order to use Klarna's payment options.
- Have a positive credit history. ...
- Don't have a lot of debt. ...
- Connect your bank account. ...
- Change the amount of your order.
What banks do Klarna accept? ›
Klarna accepts all major debit and credit cards such as Visa, Discover, Maestro and Mastercard. Prepaid cards are not accepted. Please note: Capital One does not support Buy Now, Pay Later (BNPL) products.How long does Klarna take to approve? ›
This process can take up to 24 hours. It would be best if you waited with fulfilling the order until the status changes to 'Approved'. You can verify the order's status in the Activity log (found at the order page's bottom in the Merchant portal).Whats better Afterpay or Klarna? ›
Our choice for the best buy now, pay later app between Klarna and Afterpay is Klarna. It offers more financing options, includes more than twice as many retailers in its marketplace, and can create virtual card numbers to be used anywhere Visa is accepted.Can lenders see Klarna? ›
All Klarna payment data will be visible to other lenders through credit files, and it's this - not your credit score - which impacts how likely you are to be accepted for other credit, as each lender has its own score card.Can I check if I'm eligible for Klarna? ›
You need to be at least 18 in order to use Klarna's payment options. History of positive behavior as a Klarna customer can improve your chances of being approved, so ensure to not miss a payment.Does Klarna run a background check? ›
When a credit check is performed, we verify your identity using the details you provided and we look at information from your credit report to understand your financial behavior and evaluate your creditworthiness. We will not perform a credit check on you when: Signing up to use Klarna.Can I build credit through Klarna? ›
Klarna is not a good idea if you:
Want to build credit: Most BNPL lenders do not report payments to the credit bureaus, and Klarna is no different. Showing a history of on-time payments to the bureaus can help you build credit, which opens the door to more affordable financing options in the future.
We will confirm your credit limit by email you once you have signed your Klarna Account agreement in the checkout. Your credit limit is also shown on each monthly statement or in the app.What is the highest Klarna limit? ›
There is no predefined spending limit when using Klarna.What is a good credit score? ›
Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.
Is Klarna too good to be true? ›
Klarna is safe to use as it's a legit payment service, but we're concerned about the potential financial impact of shopping this way every month, or even every other month. This would add up.Is there a limit on how many times you can use Klarna? ›
Yes. There is no set limit for how many purchases you can have with Klarna. However, the approval decision when shopping with Klarna depends on the following aspects: Your credit history with Klarna.Whats better affirm or Klarna? ›
For the sheer variety of payment types, Klarna is tops. With Klarna, you can split purchases into four interest-free purchases, pay in 30 days or sign up for a financing plan for up to 36 months. Just be on time with those payments, as Klarna does charge late fees.How many times can you Klarna? ›
There is no set limit for how many purchases you can place using Klarna. However, the approval decision when shopping with Klarna can depend on the following: Your credit history with Klarna. Your open debt and unpaid orders with Klarna.Why Is Klarna making me pay more? ›
This can happen because the order amount exceeded your purchase power, however, other credit factors are also assessed. Purchase power is the estimated amount available to spend using Klarna's pay later products. Your spending limit and any outstanding balances are factored into the purchase power amount.What happens if you don't pay Klarna after 30 days? ›
If we are unable to collect the payment on the scheduled date, we will try again. If that payment attempt also fails the missed payment will be added to the amount of the next scheduled payment. Please note, missed payments and unpaid debts are sent to debt collection.Can I buy a gas card with Klarna? ›
Companies like Affirm, Afterpay and Klarna have offered the option for most retailers for years. But in 2021, Klarna teamed up with Chevron, which also owns Texaco gas stations, to offer the feature. Here's how it works: You use the app to buy a digital in-store card for $75.Can I use Klarna straight away? ›
You can pay with debit or credit card immediately in the checkout or take advantage of our Pay later in 30 days payment option, where you can pay for the goods once you have received them via credit card or debit card. You can always monitor your outstanding payments in the Klarna app.Does Klarna send after first payment? ›
The first payment is withdrawn when you check out on the store's website, the remaining 3 payments are scheduled every 2 weeks. Log in to the app to check when your payment is due: Log in to the app.What is the maximum credit on Afterpay? ›
If you demonstrate good debt management by making your payments on time and in full, Afterpay may gradually approve you for higher spending amounts. Over time, you may be able to use Afterpay for online purchases of up to $1,000, according to Scala.
Does Klarna check Experian? ›
However, if you apply for a Klarna financing account offered in partnership with WebBank, Klarna performs a hard credit inquiry via two major credit bureaus — Experian and TransUnion. This hard credit inquiry will appear on your credit report and potentially impact your credit history and score.How does Klarna determine eligibility? ›
Use of our Financing product is dependent on a full credit check, a customer's previous credit history and other factors are reviewed. Due to this product being a regulated product where a formal credit agreement is taken out, this will be visible on a customers credit file and may impact a customer's credit score.What is better Afterpay or Klarna? ›
Our choice for the best buy now, pay later app between Klarna and Afterpay is Klarna. It offers more financing options, includes more than twice as many retailers in its marketplace, and can create virtual card numbers to be used anywhere Visa is accepted.Does Klarna improve your credit score? ›
But that's not necessarily a bad thing; assuming that you manage your account correctly, and keep up to date with your payments, Klarna can have a positive impact on your credit score. Ensuring that you have budgeted correctly and can afford any repayments is key.Does Klarna check your bank account? ›
These are the ways by which we can verify your details:
We'll send you a verification code by email to verify your email address. We'll send you a verification code via SMS to verify your phone number. We'll ask you to log into your bank to verify your identity.
Pay later in 3 interest-free instalments (minimum spend £35, maximum spend £1000) How does Pay later in 3 interest-free instalments work? Pay later in 3 interest-free instalments will allow you to spread the cost of your purchase over 3 equal payments.Why Is Klarna making me pay more upfront? ›
This can happen because the order amount exceeded your purchase power, however, other credit factors are also assessed. Purchase power is the estimated amount available to spend using Klarna's pay later products. Your spending limit and any outstanding balances are factored into the purchase power amount.Is it worth it to use Klarna? ›
Klarna is accredited by the Better Business Bureau (BBB), where it has an A+ rating. Despite its good rating, the company has nearly 400 reviews with an average rating of 1.13 out of 5 stars. On TrustPilot, Klarna has a better reputation, with an average rating of 4.4 out of 5 stars based on over 145,000 reviews.Why is my Klarna credit score bad? ›
However, if you fail to make repayments on time, Klarna could report you to credit reference agencies, which could negatively affect your credit score. Using Klarna can also negatively affect your credit score if you apply to use financing and if you take out a payment holiday.