Understanding Credit Bureau Practices: How Affirm and Klarna Assess Your CreditworthinessUnderstanding Credit Bureau Practices: How Affirm and Klarna Assess Your Creditworthiness**
The buy now, pay later industry continues to evolve, particularly regarding credit bureau reporting practices. Many of my clients ask about how companies like Affirm and Klarna impact their credit profiles when making installment purchases.
Affirm's Credit Bureau Reporting
Affirm reports consumer payment data to both Experian and TransUnion. Beginning April 1, 2025, Affirm expanded its credit reporting to include all pay-over-time products, including its popular Pay in 4 option. This means your payment history, outstanding balances, and loan terms now appear on your Experian and TransUnion credit reports.
When you apply for Affirm financing, the company typically performs a soft credit inquiry that doesn't affect your credit score. However, your subsequent payment behavior is now visible to future lenders.
Klarna's Different Approach
Klarna has taken a more cautious stance. The company currently does not report transaction data to U.S. credit bureaus, citing concerns that credit scoring models haven't properly adapted to handle BNPL loans responsibly. Klarna worries that short-term BNPL loans might be scored as if they're traditional installment loans, potentially harming consumers who use their services multiple times monthly.
Impact on Consumers
These different approaches create distinct outcomes for borrowers. With Affirm, responsible payment behavior can help build your credit history—particularly beneficial for those with limited credit profiles. Conversely, missed payments will damage your credit score.
To protect yourself while using these services:
1. Set up autopay to avoid missed payments
2. Monitor your credit reports regularly through Experian and TransUnion
3. Limit simultaneous BNPL loans to maintain a manageable payment schedule
Understanding these credit bureau practices helps consumers make informed borrowing decisions while safeguarding their financial futures.
