My guilty pleasure is a little online shopping. It doesn’t hurt anyone and some retail therapy through the screen of your mobile, stretching and flexing those fingers can do some good.
However, something we all need to watch out for is the negative impacts new credit accounts can have on our credit file.
A paypal credit card, “VERY” credit account or “take 3 plan” are examples of credit accounts that can have negative impacts on your credit file. This is because a credit search is run to check how likely you are to pay back the funds based on previous behaviours, that you are who you say you are and you live where you say you live. These are all precautions taken so that the lender can retrieve their funds via other means if you were to fall behind on the credit payments.
Some people prefer to have a lot of liquid cash and use various credit accounts to purchase things and clear their balances on a month by month basis. This is fine. However, if you were to over exhaust the use of credit accounts, your credit score could drop dramatically and affect things like buying a property with the use of a Mortgage as lenders tend to look at your debt to income ratio.
Put it this way, if you could pay back the debt on demand, go for it. If you don’t have the funds and are simply using the credit accounts to relieve the financial strain of things, be careful as this can get you caught up in a very vicious cycle.
KLARNA – Online Shopping – A girls best friend.
I buy everything that I purchase from ASOS via the Klarna option. This is not a credit account nor is your credit file affected by the use of Klarna. Something that I dislike about online shopping is that you usually have to order more than 1 of the same item to get the right fit. This is why I use Klarna. I order what I like in multiple sizes and send back what didn’t fit. I then pay my balance pretty instantly. I find this way easier and quicker than waiting for a refund.
What is Klarna?
Buy now, pay later. You have 30 days to pay for the things you have purchased. If you send things back before the 30 days, these items are deducted from your overall owed balance. A soft credit search is done which is only visible to you. This search does not affect your credit score.
How can Klarna be a problem?
If you miss your payment deadline (30 days from purchase) you will be sent a series of letters, texts and reminders. If you fail to pay for your Klarna orders indefinitely then this will affect your credit score and show on your file as a missed payment.
Klarna is growing quite rapidly and can be used to purchase items from various brands and online stores. Enjoy it, but browse, shop and pay before the deadline day.
Credit shouldn’t be taken lightly. Protect your credit score at all costs. Build up your credit, borrow funds and use credit accounts to your advantage. Just make sure that if the funds are required from you, you have the means to pay them.
Be responsible. Your future house buying self will thank you.