SHOPPERS using buy now, pay later firm Klarna's services will see these transactions logged on their credit reports from next month.
It means that lenders will be able to see this borrowing for the first time – and it could stop you from getting a mortgage or credit card in some cases.
Klarna will begin reporting shoppers' use of its services to two of the three major credit reference agencies – TransUnion and Experian – from June 1. It estimates 16million people use its services.
It comes after a big BNPL shake-up was announced by a number of credit reference agencies earlier this year.
Credit reference agencies put together information on how well you manage credit and make your repayments.
TransUnion said in February it would be including BNPL information on credit files, while Equifax and Experian said it will also include these details in reports later this year too.
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Currently, when using BNPL services, "soft checks" of eligibility are made but this doesn't appear on shoppers' credit histories.
Now, Klarna, one of the biggest BNPL firms, has revealed the exact date customers should expect to see transactions logged on credit files.
It will report any purchases made using its Pay in 3 and Pay in 30 options, as well as through its app or using the Klarna Card, to TransUnion and Experian from June 1.
Klarna uses these two credit reference agencies to perform soft credit checks on customers.
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It means that while on-time payments will be logged, any late or unpaid payments will also be listed too.
Although Klarna said the shake-up won't have any immediate impact on your credit score, it will soon.
That's because both Experian and TransUnion need to update their scoring mechanisms to reflect these changes.
How it could affect your finances
If you use BNPL services responsibly, it could mean you could use it to build your credit score up – something consumers have been unable to do because the transactions haven't been logged on credit files.
But experts have warned that the shake-up could cost you being accepted for credit or a loan.
Moneycomms personal finance expert Andrew Hagger said: "If borrowers miss payments and fall into arrears it could have a real negative impact on their ability to borrow in the future – not just via BNPL, but via credit cards, loans and even mortgages."
He said the "consequences could be disastrous" for customers' credit scores if they fail to meet repayments.
Just using BNPL services alone could be seen as a red flag by lenders.
Quilter mortgage expert Charlotte Nixon previously told The Sun that banks might see these transactions listed on your credit file and question whether you have the funds available to pay your way.
It could even impact the amount that lenders are willing to loan you – and they could even reject your application for a loan or credit in some cases.
It comes as an estimated eight million adults owe money on BNPL purchases, with the average debt standing at £538 per person.
But Klarna said logging transactions on credit files should help make sure consumers are not building up debt with multiple BNPL providers.
Its UK head Alex Marsh said: "We are pleased to help protect our UK customers and continue to cement our leadership in responsible lending, now the credit reference agencies are in a position to accept our data."
But Resolver consumer expert Martyn James said this might not be the case.
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He said: "It’s not clear that BNPL loans will improve your credit score, as many lenders may view this as ‘riskier’ credit when they check your file."
TransUnion and Experian were approached for comment.
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