"Huge increase in Klarna and PayPal schemes on credit reports within the past 12 months"
With retail sales data coming in far stronger than expected in January, Newspage asked brokers if they are seeing greater evidence of the ‘Klarnafication’ of spending and people purchasing even low cost items in three via, say, PayPal — or even deferring payment for perhaps 6-9-12 months, as per Currys and Argos. Newspage also asked how lenders look at Buy Now, Pay later schemes and whether they can impact a person’s ability to get a mortgage.
One broker, Denni Tyson, said: “I have seen a huge increase in Klarna and PayPal deferred payment schemes on credit reports within the last 12 months. I have also seen it massively backfire with a client who missed a £20 payment, which led to them not being able to use a high street lender for their new mortgage.” Another broker, Laura Bairstow, added: “We have definitely noticed an increase in Klarna usage and, unfortunately, borrowers don't often realise the impact this can have on their mortgage application.”
Meanwhile, Karen Appleton, Head of Lending at lender, Gen H, said: “Everyone should be thoughtful about how they use credit, whether it’s a credit card or Klarna. Lenders will weigh Buy Now, Pay Later data differently in their decisioning, so there’s no blanket rule in this case. It's just about using and building credit wisely. But if you are using Buy Now, Pay Later because you’re living outside your means, a lender’s affordability checks would evidence this.”
The views of 12 brokers and lenders are below.