Klarna and other BNPL systems can actually improve your credit score, expert says

0

Popular buy it now, pay later (BNPL) services such as Klarna can now help boost your credit score and improve your chances of getting a mortgage, according to financial experts. The service has grown in popularity, especially during the pandemic, as it allows cash-strapped customers to space out their payments for a product.

They recently announced that they would start reporting the use of BNPL products to UK credit reference agencies from June, in what has been described as a ‘big shake-up’. It will flag consumer purchases paid on time, late payments and unpaid purchases for “pay in 30” and “pay in three” orders placed on or after June 1 to Experian and TransUnion.

If you use Klarna or other BNPL services and pay on time on the due dates, it could significantly improve your finances. Miles Robinson, Commercial Director and Expert at Haystobelieves that while customers should be aware of the recently announced changes, you can also use the service to your advantage.

Read more: UK drivers face £500 fine and penalty points for ignoring child passenger safety warnings



Klarna has become increasingly popular

He said: “The good news is that Klarna might actually improve your score. As with credit cards, if you pay off your full amount at the end of the month or pay off your debts sooner, your credit score credit will improve because creditors will hold you accountable for the use of credit.

“With Klarna now reporting transactions to creditors like Experian and TransUnion, it could allow some people to improve their credit profile without having to take out high-cost credit cards to show accountability. Klarna will pass on information such as whether the purchase was made on time – which will help you build a positive profile.

“But, the changes will not improve your score immediately, as further updates are needed to the scoring mechanisms before Klarna is really taken seriously when it comes to affecting your credit profile, but it’s important to start on the right track because they start reporting.

What else improves your credit score? Share your tips in the comments section

“High street retailer Next, which also runs Laura Ashley, Victoria’s Secret and Gap, provides Next Pay, which is their solution to a Buy Now, Pay Later program. They have a representative APR variable of 23.9% and also perform a credit check on applicants.

“So while Klarna is the most recent example of a credit platform that is now taking steps to help your credit profile, it is extremely important to assess the credit accounts you have, credit cards up to these in-store BNPL programs This is to make sure that payments are paid on time and that you start relying less on these services as these could all start to negatively impact your your credit profile if any payments are missed, which will prevent you from taking out loans or mortgages in the future.

Share.

About Author

Comments are closed.