Does Klarna improve my credit score?

If you’re looking to treat yourself to some retail therapy or need to make an emergency purchase but you don’t have the cash available in your account right now, services like Klarna can be very tempting.
Klarna has teamed up with several online retailers to offer customers flexibility when paying for purchases.
It offers three main ways to pay:

  • Pay in 3 – where you spread the cost of an item into three instalments, paid every 30 days
  • Pay in 30 days – a buy now, pay later option that lets you purchase an item and pay for it up to 30 days later.
  • Klarna Financing – for higher-ticket items, you can split the cost of an item into monthly payments made over six – 36 months, interest free.

Intrigued? Before you head straight to the checkout and click the Klarna option, make sure you understand how it might affect your credit score first:

What is buy now, pay later?

As its name suggests, buy now, pay later means you can buy an item now and then pay for it a later date.
It’s not a new finance product; for years, some companies have let their customers defer their payment or pay in instalments.
But the growth of online payment providers like Klarna, Clearpay, and PayPal Pay in 3 has brought more attention to the pros and cons of this type of finance.
Depending on the terms offered, you might be able to buy something and then pay for it up to 30 days later. In most cases, no interest will be charged. However, if you choose to split the payment into instalments across several months – or even years – interest might apply.

Does Klarna affect your credit score?

As a relatively new way to pay, the long-term effects using Klarna will have on your credit score haven’t been fully confirmed.  
Since 1st June 2022, Klarna has agreed to share its customer information with the UK’s main credit reference agencies, but the credit scoring systems haven’t yet been updated to deal with these transactions. This means your Klarna transactions will likely be listed on your credit report but might not have the same effect on your credit score as other types of finance.
Typically, Klarna can affect your score when you make an application and when you start making payments depending on the plan you choose and whether you keep up with the payment schedule. 

Will using Klarna improve my credit score?

If you manage your Klarna account well and make all your required payments on time and in full, it could improve your credit score.
Having a successfully managed finance option like Klarna on your credit report may reassure other lenders that you can budget, make payments on schedule, and will be a reliable borrower.
However, this usually only applies to Klarna Financing. Payments made on time using its buy now, pay later options might not be reported to the credit reference agencies and so may not affect your score.

Is there any negative impact on my credit score?

Making an application for a Klarna Financing plan can initially have a negative impact on your credit score. Unlike buy now, pay later, which only requires a soft credit check and won’t affect your credit, financing plans come with a hard credit check. This will be marked on your credit report and could impact your score in the short-term.
Your credit score should recover once you start making payments, but only if you make them on time. If you fall behind or miss payments with Klarna Financing, your credit score can take a hit and defaulting on a Klarna agreement might restrict your ability to get a loan in the future.

Do Klarna do a credit check?

Klarna will carry out different types of credit check depending on the type of finance you choose.
If you’d like to take advantage of buy now, pay later, or prefer to split the cost of your purchase into three payments, a soft credit check will take place. This will let Klarna assess your eligibility without impacting your credit score.
Choose to split your payments across six to 36 months and Klarna will run a hard credit check. This will be listed on your credit report. Your ability to get finance in the future might be restricted if you have several hard credit checks on your file in a short time period.

FAQs about Klarna and credit

Do all buy now, pay later companies conduct ‘soft’ credit checks?

When applying for buy now, pay later finance, most companies will carry out a soft credit check. This lets them get an insight into your financial history, but the check won’t be visible to other lenders viewing your credit report and shouldn’t impact your credit score.
Klarna, Clearpay, PayPal Pay in 3, and Very Pay all conduct a soft credit check as part of the qualification process. In contrast, Laybuy carry out a hard credit check straight away. Hard credit checks can leave a mark on your credit report for up to two years and having too many in a short time could negatively affect your credit.

What happens if I miss my payments?

When you make a purchase via Klarna, you’re entering into an agreement with the company to make your payments on time. If you’ve opted to use Klarna’s Pay in 3 or Pay in 30 days services, your credit score won’t be affected, even if you make late payments. However, you will be in default and might be prevented from using Klarna in the future. A debt collection agency could be called in to recover the funds as a last resort.

If you’ve chosen Klarna Financing instead and are paying for your item over six to 36 months, falling behind with a payment will be marked on your credit report and could negatively impact your credit score.

What can I do to improve my credit score?

No matter what your credit score looks like right now, it’s never fixed. While it’s not an exact science and different factors can affect your credit differently, you can take steps to improve your credit score over time including:


  • Registering on the electoral roll
  • Make debt payments in full and on time
  • Check your credit report regularly and act quickly to get any errors removed
  • Minimise the number of hard searches you have in a short time
  • Keep your credit utilisation percentage low

·  Make sure you’re not financially linked to people with bad credit scores

What are better ways to build credit?

While using Klarna can be convenient and give you some time to get the funds to cover a purchase you need right now, it’s not always the best way to build credit. You’ll need to opt for a longer-term plan, like Klarna Financing, to eventually see benefits.
You may be better off building credit by taking out an interest free credit card. If you can manage the payments responsibly and clear the balance before the 0% rate period ends, buying on credit card could boost your credit score. Even so, it’s a good idea to not max out your credit cards each month and leave a gap of at least a few months before applying for another card.