Not sure what Klarna is and how it affects your credit report and score? Find out here.

Klarna is one of the most popular Buy Now Pay Later brands globally with 90m users in 17 countries. It launched in Australia in January 2020 to take on local giants such as Afterpay, Zip, and Humm.

Buy Now Pay Later services can be a great way to spread the costs of buying items over a few weeks and months. However, there are also risks in using them. It is possible to negatively impact your credit scores and your ability to borrow in the future, so it makes sense to plan in advance how to use these products responsibly.

Does Klarna affect your credit score?

Klarna generally does not negatively affect your credit file if you use it sparingly and pay on time.

In Australia, Klarna runs credit and identity checks, and those checks can appear as enquiries on your credit report even if they do not always change your score immediately.

The Australian Government has now brought buy now pay later products under the National Consumer Credit Protection framework. From 10 June 2025, BNPL providers must hold an Australian Credit Licence and comply with responsible lending obligations, including assessing whether new customers and limit increases are suitable and affordable.

Any credit check associated with Klarna may leave an enquiry on your file, which lenders can see and which may lower your score with some bureaus, especially if you have applied for several credit products recently.

Learn more about how buy now pay later affects your credit score

If you start missing Klarna repayments or default on purchases, this can negatively affect your credit file and may lower your score with credit bureaus. Over‑using BNPL can also make it harder to keep up with other loans and bills, and defaults on those accounts will appear on your credit file and may significantly reduce the credit cards and loans available to you. Even missed payments can be recorded and may cause a drop in your scores with some bureaus, though your score can recover over time with a consistent record of on‑time payments.

On the positive side, having a well‑managed credit history may be viewed favourably by some lenders. Klarna notes that it “may report information about your order to credit reporting agencies”, which can be beneficial if the information shows that you are paying on time. Demonstrating that you can take out credit and manage it responsibly may help you in the future when applying for larger loans such as a car loan, personal loan or home loan.

What is Klarna?

Klarna is a Buy Now Pay Later provider that was created in 2005 in Sweden with the aim of making it easier to shop online. You can use Klarna at check out when you buy things online with some retailers, spreading the cost over agreed periods of time.

Klarna also comes with an App where you can also create one-time use electronic cards to make purchases at any online store, not just the retailers where Klarna has a partnership.

How does Klarna work?

Klarna is a Buy Now Pay Later product like Afterpay with a similar model where you go to store that accepts Klarna for payments when completing your purchase. You typically pay for a product in four instalments, though Klarna also offers longer‑term repayment options for selected purchases. The first payment is when you purchase an item and the next 3 payments occur in fortnightly periods after that.

There are no interest charges in using Klarna and no fees if you pay on time.

In their 2021 Annual Report Klarna says their mission is to "revolutionise the way people pay, empowering customers to choose how they wish to pay, with terms from 5 fortnights to 5 years". Although it is hard for most consumers to understand how this is different from other Buy Now Pay Later services or credit cards, the truth is that Klarna and others are making it easier for many people to get access to credit. Many people desperately need credit because of loss of employment, sickness or other emergency. Buy Now Pay Later and similar products such as credit cards provide a critical service to these people who may need to repair a car, replace a broken appliance or pay medical bills.

If you fail to make payments on time, you will be charged late fees. These vary depending on the balance that is outstanding and start from as low as $2.50 for balances less than $60 and up to $15 for balances over $200.

Is Klarna really free?

Klarna is free if you make payments on time. Klarna is interest free in the same way that credit cards are interest free if you pay back your balance in full at your due date.

Klarna doesn't charge you regular monthly fees like some other Buy Now Pay Later provides. It does charge you a late fee ranging from $2.50 to $15 per month. They also make significant money from charging retailers when you use Klarna to check out, but this comes at zero cost to you.

You avoid paying any fees if you pay back on time.

Where can you use Klarna?

Klarna is accepted by some major Australian retailers such as H&M and Sephora but also a host of much smaller businesses. A full list can be found here.

A selection of their partners include:

• H&M

• Best & Less

• Sephora

• Mocka

• Adonis

• Adore Beauty

• Boohoo man

• Calvin Klein

• Kogan

• Montblanc

• Net-a-porter

• Decjuba

• Luxury Escapes

Does Klarna do credit checks?

In short, yes. Klarna runs credit and identity checks in Australia, and these checks can appear as enquiries on your credit report. Klarna may perform additional checks in certain situations, such as when you use a One‑time card for the first time or when you return to the service after a period of inactivity.

From 10 June 2025, buy now pay later providers must hold an Australian Credit Licence and comply with credit‑law obligations, including affordability and suitability assessments for new customers and some limit increases. As part of meeting these obligations, Klarna may need to run more detailed checks in future, and these may leave enquiries on your credit file that other lenders can see.

Australia operates a Comprehensive Credit Reporting system, so your payment history can be reported to credit bureaus such as Equifax and Experian, making on‑time payments important for your long‑term credit health.

With ClearScore, you can check your credit file and score for free to help monitor your credit health. Sign up for your free credit scores here.

Can using Klarna improve your credit score?

Using Klarna responsibly and making on‑time repayments may help support a positive credit history, particularly as more BNPL products come under the credit reporting framework, but the impact on your score will vary by bureau and over time.

Credit bureaus such as Experian and Equifax create credit scores that summarise how well you have managed credit in the past, and higher scores generally indicate stronger repayment behaviour. Under Comprehensive Credit Reporting, consistent on‑time payments on regulated credit products can contribute positively to your file, although each bureau’s scoring model weighs factors like repayment history, credit limits and recent enquiries differently.

More details on credit bureau and how scores are calculated can be found here.

Klarna VS Credit Card

Many Buy Now Pay Later companies make a big deal about how they are disrupting the traditional world of credit cards. Klarna's interest free model with no monthly fees (they make revenue primarily from retailers paying them fees) could save you money vs credit cards.

In practical terms the products are not much different. For example both credit cards and Klarna both allow you to:

• Buy something today but pay it back later

• Have interest free periods if you pay your balance on time

• Can be used at a variety of stores

• May negatively impact your credit file and score if you don't pay on time

The cost of credit depends on how you use the product. It's important to know how you are being charged and for what. Klarna claims is 'interest free' but so is a credit card if you pay in full. It's worth considering the total cost of credit including regular monthly fees and interest charges.

The average credit‑card interest rate in Australia is now around 17-20% per annum (roughly 1.5-1.8% per month). These are representative rates, the rate you’d get will be based on your individual circumstances.

So if you have a balance of $200 you pay between $3.40 and $4 in interest charges per month. If you use Klarna and have an outstanding balance of $200 you would pay no monthly interest or fees. In this case Klarna is cheaper than a credit card and is saving you a few dollars of interest a month. The amount of savings can be much higher though: it all depends on how much you borrow and how long you borrow for. If you borrowed $1000 you would pay $17-20 in interest on a card but still nothing on Klarna.

The major benefit of credit cards is that they are much more flexible than Klarna because Klarna can only be used at a limited number of retailers that have a relationship with Klarna. Because of this in our study, we found 9 out of 10 Klarna users had more than one Buy Now Pay Later account to be able to buy now and pay later in other stores.

In a way, Klarna is becoming more like a credit card over time with products such as the One‑time card, which can be used at most online stores. Bundll, a separate BNPL brand operated by hummgroup, offers similar functionality.

What are the alternatives to Klarna?

There are lots of alternatives to Klarna with many other Buy Now Pay Later companies.

Find out more about them below.

Note: Fees are correct as of Feb 2026. Fees could change, so it’s important to check with each provider’s terms and conditions before using their services.

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Disclaimer

This article is for informational purposes only and should not be taken as financial or credit advice. Buy Now Pay Later products like Klarna can affect your credit file and score, and your individual circumstances will determine whether these products are suitable for you.

Before using Klarna or any BNPL service, consider your ability to make repayments on time and how this fits with your overall financial situation. If you're unsure about managing credit or need help with existing debts, consider speaking with a free financial counselling service such as the National Debt Helpline (1800 007 007).

Credit reporting rules and BNPL regulations may change. From 10 June 2025, new responsible lending obligations apply to BNPL providers in Australia. Always check the current terms and conditions with your provider and review your credit file regularly to understand how credit products are affecting your credit health.

Information in this article was accurate as of February 2026 but may change over time.