Klarna, a leading global retail bank, payments, and shopping service, announced that its UK customers will soon be able to build a positive credit history by using Klarna’s Buy Now Pay Later (BNPL) products. Klarna will begin reporting use of BNPL products with UK credit reference agencies (CRAs) to protect customers, provide the industry with greater visibility of BNPL use, and give UK consumers one less reason to use high-cost credit cards. Klarna’s BNPL products in the UK are interest- and fee free, and have inbuilt controls to prevent the accumulation of debt, making them a fairer alternative to traditional credit.
“It is alarming that UK consumers are still being forced to take out high cost credit cards to demonstrate they can use credit responsibly and build their credit profile,” said Alex Marsh, Head of Klarna U.K., “That will start to change on 1 June this year as the vast majority of the 16 million UK consumers who make Klarna BNPL payments in full and on time will be able to demonstrate their responsible use of credit to other lenders.”
Klarna will report UK consumer purchases paid on time, late payments and unpaid purchases for Pay in 30 and Pay in 3 orders made on or after 1 June, 2022 to both Experian and TransUnion. This will give the financial industry greater visibility on UK shoppers’ use of Klarna’s BNPL products, help to improve affordability assessments, and means Klarna consumers who make payments on time can build a positive credit history, showing lenders they use credit responsibly.
Whilst reporting on the use of BNPL products will be reflected in UK consumer credit files from June 2022, they will not initially impact UK consumer credit scores as this requires further updates to the scoring mechanisms used by the CRAs; however it is an important step towards this goal which both Experian and TransUnion are fully committed to progressing during 2022.
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The reporting will be effective on all new purchases made in the UK using Klarna Pay in 3, Pay in 30, in app shopping and Klarna Card from 1 June onwards.
Purchases made before 1 June will not be reported; neither will payments relating to purchases made before 1 June.
While information on UK payment performance will be visible to other lenders through a UK consumer’s credit report, Experian and Transunion have further analysis and updates to make to their scoring mechanisms before BNPL transactions have a direct impact on credit scores. Klarna will continue actively partnering with them to ensure that any future impact on credit scores is fair and proportionate.
Purchase attempts which are rejected will not be reported to credit reference agencies.
Payments made through Klarna Financing in the UK are already reported to credit reference agencies; there is no change to this. Klarna Financing is a point of sale financing option to spread the cost of larger purchases over 6 – 36 months.
Klarna currently works with the credit reference agencies Experian and TransUnion in the UK.
Banking 4.0 – „how was the experience for you”
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