Does Klarna Affect Credit Score?

Is Klarna Safe and Does It Affect Your Credit Score?

It is interesting to note that Klarna has evolved into one of the most used payment solutions, especially among the younger generation. The service enables the customer to pay for purchases over an extended period without attracting interest charges. This can make the acquisition of costly products easier.

However, one common query that people have is whether using Klarna affects their credit rating. Here, we’ll explore how Klarna functions, whether it does impact credit, as well as how to use the service responsibly.

Who is Klarna and How Does it Work?

Klarna is a Swedish financial technology firm that provides point-of-sale installment credit. It works with retailers to allow customers to split the cost of items into four installments with zero interest over six weeks. It can be availed through online or through a store.

Klarna is used by signing up with some personal details for a short registration process and providing some information about yourself. Klarna will perform a soft credit check to see whether or not you qualify. If approved, you can make purchases where Klarna is accepted as your payment method.

The entire sum of the purchase is forwarded to Klarna. The 25 that first is paid at the time of buying the car. Subsequently, every two weeks, one of the three remaining installments will be charged automatically on your debit card.

Is It Bad for Your Credit Score to Use Klarna?

If you use Klarna wisely, it will not hurt your credit score in the same way that a loan would. That is because, at the initial stage, Klarna conducts a soft credit check only and does not affect credit scores. Soft inquiries are also not detrimental to your credit score at all.

Nonetheless, a lack of adherence to this aspect could indirectly influence the score. If you fail to pay on time, Klarna will refer your unpaid balance to credit collection agencies that can report the payment delay to the credit bureaus. It will be detrimental to your credit score to have too many late or missed payments.

Is It Possible for Klarna to Help Establish Credit If the Customer is Timely With the Payments?

No, Klarna does not share your payment information with the major credit reporting agencies for reporting purposes. Pay timely will not reflect on your reports or help build your credit score.

This means that although late or missed Klarna payments can negatively affect credit, on-time payments will not help. The only way to score some brownie points with Klarna is by using the recently introduced Klarna credit cards.

Guidelines to follow when using Klarna without causing harm to your credit rating.

If you want to enjoy the benefits and convenience of installment payments through Klarna without risking damage to your credit, keep these tips in mind.

• It is advisable to make purchases using Klarna only if you are very certain of the ability to repay the agreed amount within the stipulated time. Do not involve yourself in loans which can be hard to pay as agreed.
• Ensure that the debit card you have advised for payments shall have adequate balance when installments are due. Ensure you set reminders concerning payment dates in the calendar so that you do not miss to make the payments.
• You should also monitor your account to determine whether payments have been executed as required from time to time. Address any issues immediately.
• Still, if you do miss a payment for some reason, try to bring yourself back on track as soon as you can. It is the consistent late payments which will affect credit, not a one-time lapse.
• Be careful not to borrow too much from Klarna at a given period. Debt which is obtained through installment payments due to many different purchases implies that it is difficult not to default in payment.

The Bottom Line

Klarna itself will not hurt your credit rating as long as you are on schedule with all your assigned payments. However, the inability to pay on time exposes one to reports to the credit bureaus by debt collectors further down the line.

If done responsibly where one does not get trapped into overfinancing and paying without adhering to the right time to pay for the products on the Klarna installment plan, then it is advisable to use this type of payment method. It is only necessary to pay attention to your actions, and you can safely use Klarna.

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