Why you need to stop using buy now pay later platforms like Klarna right now

By Charlie Sawyer

Published Sep 5, 2023 at 09:15 AM

Reading time: 3 minutes

Hi babes, it’s your favourite blonde here. I’ve got something pretty important to talk to you all about. And no, before you ask, it isn’t about The Summer I Turned Pretty finale (although, I should note that I’m a team Conrad girlie through and through). What I need to talk to you about today is the big bad wolf that is Klarna, and why you should definitely consider cutting the cord.

If you’re new here, welcome to Explained By a Blonde, a SCREENSHOT series in which I, your resident blonde, take confusing and sometimes seemingly boring topics, and break them down into easy-to-understand nuggets of knowledge. So far, I’ve tackled inflation—I know, the honey-toned highlights really scream ‘financial expert’—and I’ve helped you all secure a refund from your university. Now, it’s time to delve into another one of gen Z’s favourite topics: online shopping.

You know how whenever you’re buying something online, whether it be a guilt-ridden fast fashion purchase on the TikTok Shop or a Stanley water bottle the size of your calf, and the payment section offers you the option of paying for your item in instalments, or as it’s cutely titled: buy now, pay later? Do you ever think, am I going to regret this later? No? Well, here’s why perhaps it’s time you start caring about it.

What is Klarna?

In its most basic form, Klarna is your day-before-payday bestie, allowing you to purchase items by paying for them in instalments rather than all in one go.

Look, I’m the last person to ever judge a Klarna-induced late-night shopping haul—you don’t even want to know how excessive my Crocs collection is. But the problem is, that adorable pink Klarna logo can be pretty deceiving, and in reality, by avoiding the costs now, you could be at risk of massively fucking up your credit score.

What’s a credit score?

So, the first thing you’re going to need to know is what a credit score is. And before you start panicking, don’t stress, up until six months ago I’d never even heard of the term, so we can figure this one out together.

Basically, a credit score is a three-digit number which indicates how reliable you are at borrowing and repaying money. It can range from ‘seriously not okay’ to ‘10 out of 10 perfect’. Things that can impact your credit score negatively usually revolve around late payments on a credit card or a loan.

To put it into context, someone like Serena van der Woodsen probably wouldn’t have the best credit score. You know, even though Miss van der Woodsen is rich to filth, she has always had a tendency to drop off the face of the earth or loan large amounts of money to New York baddies, so I can’t imagine her being the most reliable financier. Blair Waldorf, on the other hand, probably has an incredibly good score—you know Dorota wouldn’t have let her mess that up.

What’s considered a good credit score?

Credit scores can fall into five categories: poor, fair, good, very good, and excellent.

If your score is calculated between 670 to 739, you’re considered to be in the ‘good’ category. If you have a credit score between 740 and 799, you squeeze into the ‘very good’ category. And, if you’re lucky enough to make it up to the 800 to 850 range, then you’re officially an ‘excellent’ paying customer.

What’s considered a bad credit score?

On the other hand, if your score ranges between 300 and 579, then you’re considered to be a ‘poor’ creditor. Slightly above that category is the ‘fair’ benchmark, which is around the 580 to 669 mark. If you find yourself dipping below that crucial ‘good’ threshold, I’d take a second to maybe consider your financial choices.

How can Klarna hurt my credit score?

The reason why Klarna can be a pain in the arse is because it doesn’t impact your credit score in an obvious way, it’s sneaky like that. In June 2022, it was announced that Klarna would begin sharing data on whether British citizens had paid off a ‘buy now, pay later’ loan in time to credit bureaus TransUnion and Experian. It was then estimated that customers’ credit scores would be impacted by the change in 12 to 18 months.

So, what does this actually mean? If you’re making sure to pay off any instalments on time and in full, you’re chill. The problems start when you miss a payment or fail to pay back the loan in full. A dodged payment could knock your score down a few points, and before you know it, you’ll be wishing you left those crochet arm warmers in your basket.

Don’t stress though babes, we all give in to temptation here and there—shopping is seriously fun, I get it. That’s why us gals need to look out for one another.

How can I improve my credit score?

If you’re panicking over the fact that your credit score is now permanently damaged, no worries, you’re all good—it’s totally fixable. Here are three easy steps you can take to help reverse any credit score chaos:

1. It might sound obvious, but pay all of your debts and outstanding bills on time.
2. If you’re paying rent on a flat or property, make sure to add evidence of keeping up with any payments to help build a credit history.
3. Sign up to Experian Boost, a platform that can help you inrease your credit score simply by sharing information on how you manage your money.

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