Buy now, pay later (BNPL) has become part of everyday shopping. Whether it is a new outfit, furniture, a holiday or even a takeaway, services such as Klarna, Clearpay and PayPal make it easy to split the cost into smaller payments.
It can feel more like a payment option than borrowing but that is exactly what it is.
On 15 July 2026, new rules came into force bringing many interest-free Buy Now, Pay Later agreements under Financial Conduct Authority regulation. The changes give customers greater protection, but they also reinforce an important message:
Buy Now, Pay Later is credit, and it should be treated in the same careful way as any other borrowing.
What has changed?
The new rules mainly cover interest-free credit provided by a third-party company, where the balance is repaid in no more than 12 instalments over 12 months or less.
For example, you might buy something from a retailer but use Klarna or Clearpay to spread the payments. The shop and the company providing the credit are different businesses, so the agreement will normally fall under the new rules.
Credit offered directly by the retailer itself may not be covered. Agreements taken out before 15 July 2026 also remain outside the new regime.
The main changes are:
- Affordability checks
Providers must now carry out proportionate checks to make sure customers can afford the repayments before offering credit.
This does not necessarily mean a long application every time you shop. However, it should make it harder for people to build up several agreements they cannot realistically afford.
- Clearer information at checkout
Customers should be clearly told:
- How much they are borrowing
- The amount of each payment
- When payments are due
- Any late-payment charges
- What happens if a payment is missed
- What rights and protections they have
This is designed to stop Buy Now, Pay Later being presented as though it is simply another way to pay.
- Better support if you are struggling
If you fall behind, the provider must explain what has happened and offer appropriate support.
Customers experiencing financial difficulty should be treated fairly and, where appropriate, directed towards free debt advice rather than immediately being passed to debt collectors.
- The right to complain
If you believe you have been treated unfairly and the provider does not resolve your complaint, you may now be able to take it to the Financial Ombudsman Service.
- Greater protection when a purchase goes wrong
Section 75 protection is now available on qualifying regulated agreements. This may allow you to claim against the lender if, for example, the goods are faulty, do not arrive or the retailer goes out of business.
You can read the full explanation on the
FCA’s Buy Now, Pay Later guidance.
Will using Klarna affect your credit file?
It can.
From 15 July 2026, Klarna says that Pay Later use is reported to credit reference agencies as a legal requirement. Missed payments may therefore affect your credit history.
This means clients should no longer assume that using Buy Now, Pay Later is invisible simply because it is interest-free or involves relatively small amounts.
A missed payment could be more significant than the value of the original purchase, particularly if you are preparing to apply for a mortgage.
Does using Buy Now, Pay Later affect a mortgage application?
Using Klarna or another Buy Now, Pay Later service does
not automatically prevent you from getting a mortgage.
Mortgage lenders look at the overall picture, including:
- Your income
- Regular financial commitments
- Outstanding borrowing
- Credit history
- Conduct of your bank accounts
- Whether your proposed mortgage is affordable
One small agreement that has always been paid on time is unlikely to cause the same concern as several overlapping agreements or missed payments.
However, frequent use may raise questions, particularly if it suggests that you regularly rely on short-term credit for everyday spending.
For example, a lender may look more closely if your statements show numerous payments to different Buy Now, Pay Later providers, especially when combined with an overdraft, credit-card debt or little money left at the end of each month.
Even when an agreement is not visible on the credit report, the payments may still appear on your bank statements and can be included in the lender’s affordability assessment.
Should you clear Klarna before applying for a mortgage?
Clearing an outstanding balance may reduce your monthly commitments, but you should speak to your mortgage broker before moving money around or using savings earmarked for your deposit.
Your broker will need an accurate picture of:
- How much is outstanding
- Your monthly repayments
- Whether any payments have been missed
- When the agreements will be fully repaid
Never leave Buy Now, Pay Later commitments off your mortgage application if you are asked about outstanding credit. If the figures do not match your credit report or bank statements, it could create unnecessary questions and delays.
Five tips if you are planning to apply for a mortgage
- Check all three credit reports and look for any BNPL agreements or missed payments.
- Avoid opening several new agreements in the months leading up to your mortgage application.
- Make every payment on time, even if the amount seems small.
- Keep a list of outstanding balances and payment dates so nothing is overlooked.
- Tell your broker about any BNPL use before an application is submitted.
The bottom line
Buy Now, Pay Later is not necessarily bad. Used occasionally and repaid on time, it can be a convenient way to manage a purchase.
The concern comes when several small agreements build up, payments are missed or BNPL is regularly being used to cover everyday essentials.
The new FCA rules provide much-needed protection, but they do not change the basic principle:
Klarna and other Buy Now, Pay Later services are borrowing, and mortgage lenders may take that borrowing into account.
If you are worried that Klarna, Clearpay or another credit commitment could affect your mortgage application, speak to Oak Mortgages before applying. We can review the full picture and help identify a lender whose criteria are suitable for your circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage.
