Yes, using Klarna or other buy-now-pay-later (BNPL) services like Clearpay and PayPal Pay in 3, can affect how much you can borrow for a mortgage. That’s because it’s a form of credit (or debt). Lenders will look how many you have, as well as how large your commitments are, when doing the figures on what they think you’ll be able to pay back. Don’t worry though – BNPL is not a straight-up red flag for lenders. Keeping your payments low and paying on time, every time, will help show that you pay your debts.
"Lots of people worry that using Klarna will ruin their chances of getting a mortgage, but it doesn’t have to. Lenders mainly want to see that you manage your money well. So make sure you pay on time, keep your balances low and be upfront with your adviser about what you use. If you’ve missed a couple of payments in the past, don’t panic. A few months of tidy bank statements can make a real difference. Whatever your situation, there’s usually a way forward, and a good adviser will help you find it. Getting your mortgage is very much possible.”
Jo Murgatroyd
Mortgage Adviser
Does Klarna affect your chances of getting a mortgage?
The short answer is yes, using Klarna or other buy now pay later (BNPL) services like PayPal and Clearpay can affect a mortgage application.
So, will Klarna stop you getting a mortgage? It won’t be an automatic “no”, but lenders look closely at how you use BNPL. This will mainly focus on whether you pay on time and what it says about your spending habits.
Klarna and mortgage applications don’t always mix but, just like with your credit card, paying on time and keeping your balance low means that it doesn’t need to be a problem.
Does Klarna show up on your credit file?
So, does BNPL show on your credit report? It might. BNPL used to fly under the radar, but that has changed. Many providers now report to credit reference agencies.
Klarna started sharing data with credit reference agencies in June 2022.
Which credit reference agencies BNPL providers report to
There are three main credit reference agencies:
Experian
Equifax
TransUnion
Klarna reports Pay in 3 and Pay in 30 days payment data to all three agencies. Clearpay reports missed payments to these agencies.
Rules and practices are changing, so it’s best to check each provider’s latest policy.
If you miss payments and the debt goes to a collection agency, it can appear on your credit report whatever the provider does.
Soft vs hard credit checks
Many BNPL providers use soft credit checks. Other lenders can’t see these, and they don’t affect your credit score. However, some providers may use a hard check, which does leave a mark on your credit report. Your provider should tell you which one they use.
What lenders can see
A mortgage lender can see what’s on your credit file. So, they might see:
Your BNPL accounts
Your repayment history
Any missed or late payments
Your outstanding balances
When you apply for a mortgage, the lender will usually ask to see three to six months of bank statements. If you use BNPL, the lender will see your payments, even if they’re not on your credit report.
How lenders view BNPL
Mortgage lenders want to know you can manage your money. They look at your whole picture, and BNPL is one part of it.
Missed and late payments
Missed payments are the biggest red flag. A Klarna missed payment can matter for a mortgage if it’s recent or part of a pattern. A late BNPL payment can look like any other late payment. A few slips might not stop you getting a mortgage, but they can limit your choice of lenders. The more recent they are, the more they matter.
Frequent use as a sign of financial stretch
Using BNPL now and then is unlikely to worry anyone. But if your statements show lots of BNPL spending, a lender may wonder if money is tight. Regular use, especially for everyday items like groceries can look like you’re stretching your budget.
Why lenders treat BNPL like other credit
BNPL is a type of credit. So lenders will often treat it like a credit card or a loan. That’s why it’s worth being upfront with your mortgage adviser. They can tell you how different lenders see it.
How BNPL affects mortgage affordability
Even with a perfect credit score, BNPL can affect how much you can borrow when taking out a mortgage.
That’s because lenders count your regular payments as commitments. That includes loans, credit cards and some BNPL plans. The more you owe each month on those regular payments, the less you may be able to borrow towards your home. This is because lenders base affordability on everything that comes into your account, and everything going out too.
Sure, a small BNPL balance probably won’t make a big difference – it’s a pretty common thing to see on most peoples’ credit commitments. A large one, or regular BNPL plans might.
Use our Affordability Calculator to see how much you can afford to borrow.
Bank statements and spending patterns
Most lenders ask for three to six months of bank statements. They check your spending habits and look for regular payments. Lots of BNPL payments could raise questions.
Declaring BNPL balances to your adviser
Tell your mortgage adviser about any BNPL you use. They’ve seen it all before, so there’s no need to feel awkward. Being open helps them pick a lender that’s more likely to say yes.
How to use BNPL before applying for a mortgage
You don’t have to give up BNPL completely. But a few small steps can put you in a stronger position, especially if you’re aiming for a first time buyer mortgage.
If you do use BNPL, pay on time, every time. Set up reminders or use auto-pay. If you’re likely to forget, it might be best to pause BNPL in the months leading up to your mortgage application.
Pay off what you owe before you apply, if you can. It lowers your monthly commitments and keeps your statements neat. If you have BNPL accounts you never use, consider closing them.
Check your credit report with all three agencies. It’s free to do online. Look for mistakes and anything that surprises you. If you spot an error, ask for it to be fixed. It’s better to know before a lender does.
There’s no magic number. If you’ve had missed payments, a few months of clean statements can help. If you’ve cleared your balances, you may be able to apply sooner. Your adviser can suggest the best time for your situation.
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Something to bear in mind...
Frequently asked questions
Often, yes. They may see it on your credit file if your provider reports it. They’ll also see BNPL payments on your bank statements. So it’s wise to assume your lender will know.
It is usually a good idea to avoid BNPL in the months before applying. If you do use it, pay on time.
It can. Clearpay hasn’t reported repayment history to credit reference agencies so far. But that could change in the future.
Either way, lenders can still see the payments on your bank statements, and the same goes for PayPal Pay in 3. Missed payments could also lead to debt collection, which would show on your credit file.
Yes, it’s often possible. A few late payments may limit your options, but they won’t always stop you. A mortgage adviser can look at your situation and find lenders who may help.
It may help, but it’s not guaranteed. Clearing your balance lowers what you owe each month. If your provider reports to credit reference agencies, paying on time could improve your record over time.