Early bird shoppers and last-minute holiday shoppers have one thing in common: they spent an average of $875 on holiday-related purchases last Christmas season.
And with 37% of Americans planning to use financing options to fund their holiday purchases, Klarna users can only hope that all of this spending goes towards increasing their credit score.
So, how does Klarna affect your credit score?
Can I Build Credit with Klarna?
No, it’s not possible to build credit with your Klarna purchases. And it’s not as if Klarna isn’t allowed to report to the credit bureaus. On February 28, 2022, the credit bureaus enabled BNPL providers to report their pay-in-4 loans. While some BNPL providers like Sezzle have started reporting to the credit bureaus, Klarna has not followed suit.
The future isn’t bleak, however, since UK citizens have been building positive credit history using Klarna since May of 2022. But until the US is given the same treatment, you can build credit history on Klarna purchases using Cushion’s Services.
Does Klarna Perform a Credit Check?
Another way financial institutions can affect your credit is through hard credit checks. Luckily, Klarna only performs soft credit checks for its Buy Now, Pay Later (BNPL) options which shouldn’t negatively impact your credit score.
If you apply for their other financing options though, a hard credit check may be performed. And this can affect your credit negatively, especially if multiple hard credit checks are done in a short period of time.
Will Late Klarna Payments Affect My Credit Score?
Yes, late payments may be reported to the credit bureaus at Klarna’s discretion. This means that if you don’t use an app like Cushion to report your Klarna credit history, then Klarna can only affect your credit score negatively.
Does Klarna require a minimum credit score?
No, even though Klarna performs credit checks, there is no minimum credit score requirement for their services. However, a low credit score may lower your approval amount.
Related article: What Cards Does Klarna Accept?
Summary
At the time of writing, building credit with Klarna isn’t possible. Despite this, Klarna can still negatively impact your credit score through hard credit checks and late payments.
This means that applying for Klarna’s financing options and missing payments will negatively affect your credit score.
