Consistently using buy now, pay later (BNPL) services such as Klarna could impact customers’ ability to get a mortgage, brokers have warned.
SJ Mortgages director, Jack Tutton said he recently had an issue obtaining a mortgage for a client as they had 17 active Klarna accounts and 123 closed accounts over the past 18 months, with the amount borrowed being as low as £11.
“While the client had the money to buy the items they bought, using Klarna was just easy,” Tutton stated.
“All the accounts had a severe impact on the client’s score, resulting in them not being able to get a mortgage with a high street lender and having to pay a higher rate than perhaps they would have.”
This situation was explained by another mortgage broker Mint Mortgages & Protection director, David Stirling, who pointed out that lenders don’t like to see overuse of borrowing, describing it as a “red flag” that a borrower could get themselves into difficulties down the line.
However, Klarna insisted that it only conducts soft searches and only repayment behaviour, not searches, is what appears on file.
It said that its buy now, pay later transactions do not impact a customer’s numerical credit score, and that on-time or early repayment can be viewed positively.
A spokesperson also said: “If some legacy banks still can’t accept that responsible BNPL use is smart, healthy money management, that says more about them than it does about our customers.”
Additionally, Orchard Financial Advisers managing director, Ben Perks, argued that the “dim view” mortgage lenders currently have of Klarna usage isn’t always justified.
“Now, it is just a modern shopping method used by savvy spenders,” he said.
“The high street is struggling and people don’t visit shops as they used to, now people shop online and order multiple outfits and sizes.
“Cash flow savvy shoppers are using Klarna to make bulk orders. Why have £250 leave your account, when you only intend on spending £50?”
Perks therefore suggested that banks need to change their approach and move with the times, pointing out that “Klarna aren’t going anywhere”.
A similar sentiment was shared by Charwin Mortgages director, Ranald Micthell, who said: “Using Klarna isn’t reckless, it’s modern living and it’s how millions shop now.”
However, Mitchell pointed out that customers can still suffer through using Klarna, but in a way that is no real fault of their own.
“Some clients are failing their mortgage credit scores because of recurring Klarna searches. Not because they missed payments, but because the system panicked,” he said.
“Lenders, credit reference agencies, even the algorithms, they all see this as high-risk behaviour, when it’s often just smart cash flow management.”
Thanks to the Newspage community for sharing their thoughts with FTAdviser
tom.dunstan@ft.com
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