Credit Building > Does Klarna Impact Your Mortgage Application?

Does Klarna Impact Your Mortgage Application?

Wollit Team4 minute read · Updated 26th February 2025

Are you planning to apply for a mortgage but concerned about your Klarna usage? If you've been wondering “does Klarna affect mortgage applications?”, you're not alone. With the rising popularity of Buy Now, Pay Later (BNPL) services, many prospective homebuyers are questioning how these convenient payment methods might influence their mortgage prospects.

Understanding Klarna and Buy Now, Pay Later (BNPL) services

Klarna has become one of the UK's most popular BNPL services, offering consumers the ability to split payments into manageable instalments, often interest-free. While these services provide convenience and flexibility, it's important to recognise that they are a form of credit.

As BNPL services have grown in popularity, they've also gained visibility on credit reports. This means that your Klarna usage is increasingly likely to be seen by potential mortgage lenders as part of their assessment of your financial behaviour.

Unlike traditional credit cards or loans, BNPL services like Klarna can sometimes feel less like "real credit" because of their seamless integration into online shopping experiences. However, from a mortgage lender's perspective, they represent financial commitments that need to be considered when assessing your application.

How Klarna usage appears on your credit report

The relationship between Klarna and credit reporting has evolved. Today, Klarna reports payment activity to major credit reference agencies including Experian and TransUnion. This means your Klarna usage creates a digital footprint on your credit report that mortgage lenders can see.

When used responsibly, Klarna can actually have positive effects. Timely payments demonstrate financial reliability and can contribute positively to your credit history. However, the opposite is also true – missed or late payments may harm your credit score and raise red flags for mortgage lenders.

It's not just about whether you make payments on time. Mortgage lenders may view frequent BNPL usage as potentially concerning, even if you're keeping up with payments. Multiple Klarna agreements could suggest to lenders that you're overextending yourself financially or relying heavily on credit for everyday purchases.

Does Klarna affect mortgage approval directly?

When you apply for a mortgage, lenders conduct a thorough assessment of your creditworthiness. This includes reviewing your credit report, analyzing your income and outgoings, and evaluating your overall financial habits. Your Klarna usage forms part of this bigger picture.

Mortgage lenders are primarily concerned with risk assessment. They want to determine how likely you are to consistently make your mortgage payments. Frequent use of Klarna or other BNPL services might raise questions about your financial stability, particularly if you seem reliant on these services for regular purchases.

Some mortgage lenders may view excessive BNPL usage as a potential warning sign, especially if it indicates a pattern of spending beyond your means. This doesn't mean using Klarna automatically disqualifies you from getting a mortgage, but it could influence the lender's decision-making process.

The impact of Klarna on your credit score and thereby Klarna’s impact on mortgage eligibility

Your credit score plays a crucial role in mortgage approval, and Klarna usage can affect this important number. Missed Klarna payments can lower your credit score, potentially making it more difficult to secure mortgage approval or favourable terms.

Even relatively small missed payments can have significant consequences. A missed payment of just £20 could potentially lead to rejection by certain mortgage lenders who take a strict approach to credit assessment. This highlights the importance of managing all credit commitments responsibly, regardless of size.

Maintaining a strong credit score is essential for securing the best possible mortgage terms, including lower interest rates and higher loan amounts. To learn more about the relationship between credit scores and mortgages, visit our guide on how credit scores affect mortgages.

How long does Klarna stay on your credit report?

Like other credit accounts, Klarna activity typically remains on your credit report for six years. This includes both positive payment history (which can help your application) and any negative marks such as missed or late payments (which could harm your chances).

The six-year timeframe is important to understand when planning for a future mortgage application. Even if you've stopped using Klarna, your past usage and payment behaviour will still be visible to mortgage lenders during this period.

Understanding this timeline can help you plan your financial habits effectively. If you're thinking about applying for a mortgage in the next few years, it's worth considering how your current Klarna usage might appear to lenders when that time comes.

Tips to manage Klarna and prepare for a mortgage application

If you're planning to apply for a mortgage and currently use Klarna, there are several strategies to help manage the potential impact:

Reduce Klarna usage before application: In the months leading up to a mortgage application, try to minimize your use of Klarna and other BNPL services. This demonstrates financial independence and reduces ongoing commitments.
Set payment reminders: Ensure all Klarna payments are made on time to avoid negative marks on your credit report. Set up calendar alerts or automated payments if available.
Review your credit report regularly: Monitor your credit report to ensure Klarna payments are being recorded accurately and to identify any issues that need addressing before applying for a mortgage.
Reduce overall debt: Focus on lowering your debt-to-income ratio by paying down existing debts, which will strengthen your financial profile in the eyes of mortgage lenders.
Save for a larger deposit: Building a substantial deposit can sometimes help offset concerns lenders might have about your credit history.

Financial habits to avoid before applying for a mortgage

In addition to managing Klarna effectively, there are several financial behaviours worth avoiding when preparing for a mortgage application:

Taking on new BNPL agreements: Avoid opening new Klarna or other BNPL agreements close to your application date, as these represent new credit commitments.
Making large purchases on credit: Significant credit-based purchases can affect your affordability assessment, potentially reducing the amount you can borrow.
Applying for other forms of credit: Multiple credit applications in a short period can lower your credit score temporarily and may concern mortgage lenders.
Missing any payments: Ensure all bills, credit cards, loans, and BNPL payments are made on time, as late payments can significantly impact your mortgage prospects.
Maxing out credit cards: High credit utilisation can negatively affect your credit score, so aim to keep balances below 30% of your available credit.

For more information about safely using BNPL services like Klarna, explore our guide on Klarna safety.

Building a stronger credit profile for mortgage success

While Klarna can affect your mortgage application, it's just one factor in the broader picture of your financial health. By using Klarna responsibly, managing your overall credit profile effectively, and adopting positive financial habits, you can improve your chances of mortgage approval.

At Wollit, we understand the importance of building and maintaining a strong credit score, especially when preparing for significant financial commitments like a mortgage. Our Credit Builder service is designed to help you improve your credit score through positive payment reporting to all three UK credit reference agencies.

Remember that lenders are primarily looking for evidence that you can manage credit responsibly and consistently meet your financial obligations. By demonstrating these qualities across all your credit accounts, including Klarna, you'll be taking important steps toward achieving your homeownership goals.