Do You Have to Have Good Credit to Use Klarna?

Klarna is a financial technology service that allows consumers to purchase items and spread the cost over time. It functions as a “buy now, pay later” (BNPL) platform, offering flexibility for online and in-store purchases. This service provides an alternative to traditional payment methods by breaking down the total amount into smaller, manageable installments.

Klarna’s Approval Process

When using Klarna, the approval process assesses your financial circumstances. For common options like “Pay in 4” (four interest-free installments) and “Pay in 30 days,” Klarna typically conducts a soft credit check. This inquiry evaluates your creditworthiness without impacting your credit score and is generally not visible to other lenders. For longer-term financing plans, Klarna may perform a hard credit check, which can temporarily show on your credit report.

Approval is not solely based on a traditional credit score but considers a combination of factors. These can include the specific merchant, the total value of your order, and Klarna’s internal assessment of risk. Your past payment history with Klarna also plays a role, with positive payment behavior improving your chances of future approvals. Each purchase attempt is an individual approval decision, meaning approval for one transaction does not guarantee approval for all others.

Impact of Klarna on Credit Scores

The way Klarna affects your credit score depends on the specific payment plan you select and your payment behavior. Soft credit checks, used for options like “Pay in 4” and “Pay in 30 days,” do not influence your credit score. Klarna reports payment activity for its longer-term financing plans to major credit bureaus, such as TransUnion and Experian. Making on-time payments for these financing agreements can contribute positively to your credit history.

Conversely, missed or late payments on any Klarna plan, particularly the longer-term financing, can negatively impact your credit score. If an account goes to collections due to unpaid debt, this negative mark will appear on your credit reports and can remain for up to six or seven years. While “Pay in 4” plans typically do not report positive payment history to credit bureaus, missing payments or defaulting on these can still lead to negative reporting.

Using Klarna with Limited Credit History

Klarna can serve as an accessible payment option for individuals with limited or no established credit history. Its approval process for short-term plans often relies on soft credit checks rather than a traditional credit score, making it more readily available than conventional credit products.

For those with limited credit, starting with smaller purchases or opting for the “Pay in 4” plan can be a beneficial strategy. Consistent on-time payments, even if not reported to credit bureaus, build a positive internal payment history with Klarna. This reliability can lead to increased approval limits or eligibility for larger purchases over time.