Missing Klarna payments will affect your credit score under Buy Now Pay Later changes


If you use Klarna to purchase products but pay later, be sure to track those payments. Soon, missing a refund could hurt your credit score.

Klarna, a lending service that allows shoppers to pay for products like Asos and Misguided in installments, has confirmed it will start reporting to UK credit reference agencies from June. Klarna says this will protect customers and help them build good credit scores, as long as they pay what they owe.

Alex Marsh, Director of Klarna UK, said: “It is alarming that UK consumers are still being forced to take out high cost credit cards to demonstrate that they can use credit responsibly and build their credit profile.

Read more: UK interest rates over time – When did mortgage rates peak?

“That will start to change on June 1 this year, as the vast majority of the 16 million UK consumers who make Klarna Buy Now Pay Later (BNPL) payments in full and on time will be able to demonstrate their responsible use of credit to other lenders.”

Getting a good credit rating is essential for lending money, including mortgages to buy a home. A poor debt repayment history or missing scheduled bills can lower a person’s score.

Klarna said credit ratings will not be immediately affected from June as credit rating mechanisms require updates. Klarna will also make it clear to customers that BNPL options are credit products and that there are consequences for missing payments.

Concerns have been raised about the rapid growth in popularity of BNPL companies in general. While BNPL products can help people avoid paying interest on their loans, people can rack up debt quickly by using them as an option at online checkouts.

The Woolard review previously found that the use of buy now, pay later products almost quadrupled in 2020, to £2.7bn.

In February, the Financial Conduct Authority said some BNPL companies had agreed to change the terms of their customer contracts to make them fairer and easier to understand.

The UK government plans to change the law to incorporate certain forms of unregulated BNPL products into FCA regulations.

Jenny Ross, which one? The publisher of Money, said: “Using buy now, pay later is an easy and convenient way to pay millions. However, with currently little to no information or warnings about the risks of incurring fees falling behind or going into debt, this raises concerns that many buyers do not fully understand the products they are using.

“The decision by BNPL providers to work with credit reference agencies to flag customer use of BNPL and missed payments is a step in the right direction, as it could help mitigate the risk of consumers contracting more BNPL credit than they can afford.

“However, this does not remove the urgent need for government regulation of all BNPL businesses to follow as soon as possible to ensure users are properly protected.”

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