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Klarna payment data now shared with Experian and TransUnion

Emma Lunn
Written By:
Emma Lunn

Klarna customers will now have their borrowing data reported to two of the UK’s biggest credit reference agencies.

As of today, Klarna will report payment information to credit reference agencies Experian and TransUnion.

This will include UK consumer purchases paid on time, late payments and unpaid purchases for Pay in 30 and Pay in 3 orders made.

Purchases made before 1 June will not be reported; neither will payments relating to purchases made before 1 June.

Payments made through Klarna Financing in the UK were already reported to credit reference agencies and there’s no change to this. Klarna Financing is a point-of-sale financing option to spread the cost of larger purchases over six to 36 months.

However, while the information will be shared, it will only start appearing on credit reports later this year, Experian confirmed. And it’ll take a little longer to start impacting credit scores – approximately 12-18 months from now.

This is because both Experian and TransUnion need time to update their credit scoring mechanisms to reflect the changes, so any positive or negative payment information will only start affecting Klarna users’ credit scores later this year.

The move was first announced last month and comes as BNPL firms face pressure from MPs and campaigners to treat customers fairly. Critics warn that this type of short-term lending encourages people to buy items they can’t afford.

Klarna bills itself as a “fairer alternative to traditional credit” and claims the deal with Experian and TransUnion will help its customers build a positive credit history. It said the move will protect UK consumers from building up multiple lines of credit with different providers.

Alex Marsh, head of Klarna UK, previously said: “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. That will start to change on 1 June 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 said the agreement with the credit reference agencies means its customers who make payments on time can build a positive credit history, showing lenders they use credit responsibly. However, on the flip side, over-indebted customers and those who miss payments will see their credit score decline as a result of the credit scoring agreement.

The BNPL market more than trebled in size during 2020 and is expected to become subject to Financial Conduct Authority (FCA) regulation during the next year or two.

Klarna was forced to make changes to protect consumers following publication of The Woolard Review last year. The changes include updated text at the checkout to make it clear that BNPL options are credit products, with consequences for missed payments. It has also taken steps to ensure that BNPL terms and conditions are clear, simple and easy to understand.