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Over the last few years, Buy Now, Pay Later (BNPL) platforms like Klarna, Affirm, Afterpay, and Zip have exploded in popularity. These services promise instant purchasing power with little to no interest, typically split into 4 biweekly payments or stretched across a few months. But as consumers flock to BNPL for convenience, a bigger question looms: Do these platforms impact your credit score?The answer? It depends.Understanding the BNPL Model BNPL services work like micro-loans at the point of sale. You choose a product, select BNPL at checkout, and agree to pay over time, often with no interest. Sounds like a win-win, but it’s important to understand what happens behind the scenes.Some BNPL services perform a soft credit check when you apply (which doesn’t affect your score), while others, like Affirm, may perform a (hard inquiry) depending on the loan amount or terms — which can lower your score temporarily.<figure id="figure-xemybj522dmdnd816a" class=""><img id="xemybj522dmdnd816a" src="https://media.gettyimages.com/id/2165987617/photo/smiling-woman-customer-paying-with-contactless-credit-card-in-a-restaurant.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=IlbuVae5a9KDHyx0_S2imVMvLrPO48zRD4xH8pJcxI0=" alt="Smiling woman customer paying with contactless credit card in a restaurant." title="Smiling woman customer paying with contactless credit card in a restaurant." class="object-cover bg-gray-100 rounded-2xl md:rounded-3xl lg:rounded-4xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="large" data-aspect="16:9" data-caption="Your credit choices today shape your financial future tomorrow" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://media.gettyimages.com/id/2165987617/photo/smiling-woman-customer-paying-with-contactless-credit-card-in-a-restaurant.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=IlbuVae5a9KDHyx0_S2imVMvLrPO48zRD4xH8pJcxI0=" data-mce-style="aspect-ratio: 16/9; object-position: center center;"><figcaption class="body-normal text-gray-500 mt-2">Your credit choices today shape your financial future tomorrow </figcaption>Reporting to Credit Bureaus: A New Trend Historically, BNPL providers did not report repayment behavior to credit bureaus. That’s changing. Affirm now reports certain loans to Experian. Klarna began reporting UK customers’ data to credit bureaus in 2022, and U.S. reporting may follow.</figure>If your BNPL provider reports to credit bureaus:-&nbsp; On-time payments may help build credit (especiallyfor thin or no-credit borrowers). -&nbsp; Missed payments could hurt your score just like missing a credit card or loan payment.If the account is sent to collections, it will have a major negative impact. &nbsp; Why It Matters: Credit Utilization &amp; Thin Files Traditional credit scores like FICO are based on five factors: payment history, credit utilization, length of credit history, credit mix, and new credit. BNPL services, when reported, can affect at least three of these.However, many BNPL loans aren’t factored into FICO or VantageScore calculations yet. That means you could be accumulating multiple short-term debts without the positive credit-building benefits — and with the risk of damaging your score if you fall behind.Best Practices for BNPL Users If you’re using BNPL services, here’s how to stay in control:-&nbsp; Only buy what you can afford to repay. Don’t treat BNPL as “free money.” -&nbsp; Monitor due dates. Set calendar reminders to avoid missed payments. -&nbsp; Check if the provider reports to credit bureaus. If yes, treat it like a credit card or loan. -&nbsp; Avoid stacking multiple BNPL loans. It’s easy to lose track and overextend yourself. &nbsp; BNPL services like Klarna and Affirm offer speed and flexibility, but they aren’t risk-free. While some don’t affect your credit today, more are starting to report to credit agencies — making it possible for your behavior to help or hurt your credit score.<figure id="figure-a1gtuhdnypmdndf4v2"><img id="a1gtuhdnypmdndf4v2" src="https://media.gettyimages.com/id/2194369347/photo/shopping-on-the-move.jpg?b=1&s=2048x2048&w=0&k=20&c=f4yGo5t9uQdFKxXQMjd99ddnk1bL6UjWfsQVY1L5igE=" alt="Shopping on the move" title="Shopping on the move" class="object-cover bg-gray-100 rounded-lg md:rounded-xl lg:rounded-2xl" style="aspect-ratio: 16/9; object-position: undefined undefined;" data-corners="default" data-aspect="16:9" data-caption="Amplifier Financial " data-positionX="undefined" data-positionY="undefined" data-fullWidth="false"/><figcaption class="body-normal text-gray-500 mt-2">Amplifier Financial </figcaption></figure>

Does Klarna, Affirm, and Other BNPL Services Affect Your Credit Score?

Wood house and row of coin money on wood table and , selective focus, Planning to buy property. Choose what's the best. A symbol for construction ,ecology, loan concepts.

401(k) vs IRA: What’s Better for Your Financial Future? When planning for retirement, two of the most powerful tools available are the 401(k) and the Individual Retirement Account (IRA). While both accounts offer tax advantages and long-term growth potential, understanding their differences is crucial to making the best decision for your future.In this article, we’ll break down the key differences between 401(k)s and IRAs, highlight the pros and cons of each, and help you decide which might be better for your specific financial goals.<table style="border-collapse: collapse; width: 100%;" border="1" data-mce-style="border-collapse: collapse; width: 100%;"><tbody><tr><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Feature</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">401K&nbsp;</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">IRA (Traditional or Roth)</td></tr><tr><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">&nbsp;Contribution Limit (2025) </td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">$23,000 (plus $7,500 catch-up if 50+)</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">$7,000 (plus $1,000 catch-up if 50+)</td></tr><tr><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Offered By</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Employer</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Opened Individually</td></tr><tr><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Tax Advantage</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Pre-tax (traditional 401(k)) or Roth</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Traditional (pre-tax) or Roth</td></tr><tr><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Investment Choices</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Limited (based on employer plan)</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Wide range (stocks, ETFs, etc.)</td></tr><tr><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Employer Match</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">Yes (typically 3–6%)</td><td style="width: 33.3333%;" data-mce-style="width: 33.3333%;">No</td></tr></tbody></table>What is a 401(k)? A 401(k) is an employer-sponsored retirement savings plan that allows you to contribute a portion of your pre-tax salary to a tax-advantaged investment account. Many employers also offer a matching contribution, which is essentially free money for your future.Benefits: -High contribution limits (3x more than an IRA) -Employer match (e.g., 50% of the first 6% you contribute) -Automatic payroll deductions make saving effortless Drawbacks: -Limited investment choices, you're stuck with what your employer offers -Fees can vary depending on the plan -You need an employer to offer itWhat is an IRA? An Individual Retirement Account (IRA) is opened on your own through a broker or bank. You can choose between:Traditional IRA: contributions may be tax-deductible, but withdrawals in retirement are taxed. Roth IRA: contributions are made with after-tax dollars, but withdrawals are completely tax-free in retirement.Benefits: -Total control over your investments -Roth IRA offers tax-free growth -Ideal for self-employed or those without a 401(k) Drawbacks: -Lower contribution limit -No employer match -Income limits apply to Roth IRAsWhich Is Better? The answer depends on your situation, but here’s a rule of thumb:If you have a 401(k) with a match: Contribute enough to get the full match first. That’s a guaranteed return you shouldn’t leave on the table. Then consider opening a Roth IRA for tax diversification.If you're self-employed or don’t have a 401(k): Start with an IRA, especially a Roth IRA if you're younger and expect your income to rise over time. You can open one through platforms like Fidelity, Vanguard, or Charles Schwab.Advanced strategy: Max out both. In 2025, that’s $23,000 in your 401(k) and $7,000 in your IRA, or more if you’re over 50. This is ideal for high earners aiming to retire early.In a perfect world, you’d use both accounts together to diversify your tax exposure and maximize your retirement savings.&nbsp;

401 (K) vs IRA: What's Better For You?

Private equity (PE) firms typically dislike cyclical businesses because these companies experience unpredictable swings in performance tied to economic conditions. Cyclical firms, like those in the auto, travel, construction, or luxury goods sectors, often see revenues and profits surge during booms but collapse during downturns. PE investors aim for predictable, stable cash flows to support debt repayments and ensure consistent returns. In contrast, cyclical companies introduce high risk into the investment due to revenue volatility, reduced cash flow reliability, and limited control over external market forces. For example, the automotive industry is notoriously cyclical. During the 2008 financial crisis, U.S. auto sales dropped from 16 million units in 2007 to around 10 million in 2009. Many firms faced bankruptcy, including General Motors, which had to be bailed out. A PE firm heavily invested in a car manufacturer during such a cycle would’ve faced major losses or total write-offs. This level of vulnerability to macroeconomic shocks makes it unattractive for leveraged buyouts, where stable performance is key. PE firms use leverage (debt) to enhance returns. The issue with cyclical businesses is that during economic downturns, they might not generate enough cash to service this debt, increasing the risk of default. PE’s success depends on financial engineering, operational improvements, and exit strategies like IPOs or sales. If cash flows dry up due to a recession, the firm might breach debt covenants, miss payments, or even lose the asset to lenders. This risk-reward imbalance deters investment in businesses where performance can’t be managed internally or projected with confidence.The cyclical company’s EBITDA fluctuates wildly, making debt coverage and valuation volatile. The stable company, often in healthcare or consumer staples, shows steady, reliable performance, perfect for PE models.Furthermore, exit timing becomes difficult with cyclical businesses. If the PE firm plans to exit during a downturn, valuations are depressed, and buyers are scarce. For instance, a PE firm invested in a luxury cruise line in 2018 might have seen strong performance in 2019, but COVID-19 decimated the industry in 2020–2021. The planned IPO or sale would have had to be delayed for years, tying up capital and harming internal rates of return (IRRs). In contrast, investing in non-cyclical businesses like software, medical devices, or B2B SaaS offers smoother exit windows.Thus, private equity shuns cyclical businesses because of their unpredictable earnings, higher default risk under leverage, and timing-dependent exits. PE thrives on control and predictability, while cyclical industries are often at the mercy of external, uncontrollable forces.

Why Private Equity firms dislike cyclical businesses

Modern skyscrapers in the CBD near buildings of the Ottawa skyline, towers and skyscrapers for Office space. Ottawa is a major hub for business in America.

Financial institutions have long been criticized for precipitating global financial meltdowns. However, the institutions themselves are not always the root of the problem. Often, it is the regulatory environment, or lack thereof, that enables the proliferation of risky and poorly understood financial instruments. Chief among these are derivatives, powerful tools that, while essential in modern finance, can also act as systemic destabilizers when abused or misunderstood.&nbsp; The Derivative Market: Too Big to Ignore According to the International Swaps and Derivatives Association (ISDA), the global over-the-counter (OTC) derivatives notional outstanding reached $729.8 trillion by the end of June 2024. To put this in perspective, this figure is over 7 times the size of global GDP, which stood at around $104 trillion in 2024.This sheer scale makes the derivative market a double-edged sword. While it facilitates risk management and liquidity, it also creates a web of interconnected obligations — a financial house of cards that can collapse if a major counterparty fails.A Historic Warning: LTCM and Systemic Risk The collapse of Long-Term Capital Management (LTCM) in 1998 remains one of the most illustrative examples of how derivatives can wreak havoc. LTCM was a hedge fund run by PhDs and Nobel laureates, yet its massive positions in interest rate swaps and credit derivatives led to a near-global financial panic. With over $1 trillion in derivative exposure against just $4 billion in capital, the firm’s downfall required a $3.6 billion bailout organized by the Federal Reserve to prevent systemic contagion.&nbsp; Types of Derivatives: The Four Pillars There are four primary types of derivatives:Futures : Standardized contracts to buy/sell assets at a future date and price, traded on exchanges. Forwards : Customized contracts like futures, but traded OTC. Options : Give the buyer the right, but not the obligation, to buy/sell an asset at a set price before a certain date. Swaps : Agreements to exchange cash flows, such as interest rate or currency swaps. &nbsp; Why Derivatives Are So Widely Used? Derivatives are extensively used by financial institutions, corporations, and hedge funds for three main purposes: hedging, speculation, and arbitrage. Hedging involves protecting against adverse price movements in currencies, interest rates, or commodities; for instance, an airline might use fuel futures to lock in fuel prices and manage cost volatility. Speculation refers to taking positions to profit from anticipated market movements and potentially amplify returns such as a hedge fund using options to benefit from volatility. Arbitrage, on the other hand, seeks to exploit price discrepancies between markets or instruments; for example, traders might arbitrage mispricings between spot and futures markets to earn risk-free profits.Potential benefits of the derivative instruments!Derivatives offer several important benefits that enhance the functioning of financial markets. One key advantage is risk transfer, which enables companies to shift unwanted risk to other parties that are more willing or better equipped to bear it. Derivatives also contribute to price discovery by helping markets determine the fair value of underlying assets through active trading. Additionally, they enhance liquidity by encouraging higher trading volumes and capital flow, particularly in commodities and fixed income markets. Lastly, derivatives provide access to markets or assets that might otherwise be difficult or impossible to reach, allowing institutions to gain exposure without the need for direct ownership. &nbsp; Despite their benefits, derivatives also come with significant drawbacks and dangers. One major concern is leverage; since many derivatives require minimal upfront capital, they can create massive exposure, amplifying both gains and losses. For example, a mere 1% movement in interest rates can potentially wipe out a portfolio that is leveraged 100 times. Another issue is opacity ,over-the-counter (OTC) derivatives are often less regulated and more difficult to monitor, making it challenging to assess systemic risks. Counterparty risk is also a concern, as the failure of a major market participant can trigger a domino effect across the financial system. Additionally, there is the problem of moral hazard: if institutions believe that central banks will bail them out in times of crisis, they may be incentivized to take excessive and reckless risks. &nbsp; Conclusion: Necessary Evil or Ticking Time Bomb? Derivatives are not inherently bad, in fact, they’re essential to the functioning of global finance. But like all powerful tools, they require responsible use, transparent reporting, and stringent oversight. History has shown us that ignoring the systemic implications of derivatives can be catastrophic.In the end, it’s not just about the instruments, it’s about who’s holding them, how much, and under what terms. With a market nearing $730 trillion in size, one misstep could ripple across the globe.By Ahmed Almuhr

The Dark Side of Innovation: Derivatives and Financial Stability

Moody’s Just Downgraded U.S. Debt—Here’s What It Means for YouIn a move that sent ripples through global financial markets, Moody’s has officially downgraded the credit rating of U.S. government debt from from Aaa&nbsp;(its highest rating) to Aa1. This decision marks a serious warning about the nation’s fiscal health and the sustainability of its growing debt burden. While Wall Street took notice immediately, Main Street should too—because the consequences affect everyone.What’s Already Happened? Since the announcement, key financial indicators have already reacted:- The U.S. dollar weakened, signaling a loss of confidence among investors in the U.S. economy's near-term outlook. - Treasury prices fell, reflecting decreased demand for U.S. government bonds. - Yields rose, meaning the government will now have to pay more to borrow money. In practical terms, this makes new debt more expensive—and guess who ultimately foots that bill? Taxpayers.&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; What’s Likely to Happen Next? - Higher Borrowing Costs for the Government: Investors are now likely to demand higher interest rates on U.S. Treasury bonds to compensate for what they perceive as increased risk. This not only affects government financing but could also drive up interest rates across the broader economy—including mortgages, car loans, and credit cards. - A Troubling Signal to Markets: A downgrade doesn’t just affect rates; it sends a psychological signal to markets. It tells investors worldwide that the U.S. may be headed toward longer-term fiscal instability. Confidence, once shaken, is hard to rebuild—and that has implications for both domestic and international investment flows. - Forced Selling of Treasuries: Some institutional investors—such as pension funds and insurance companies—are only allowed to hold top-rated debt. A downgrade to anything below AAA may force them to sell U.S. Treasuries. This could spark a cascade of selling pressure, pushing bond prices even lower and yields even higher in a feedback loop.<figure id="figure-q27vjj3wu6mav9naxt" class=""><img id="q27vjj3wu6mav9naxt" src="https://media.gettyimages.com/id/864893078/photo/tired-or-stressed-businessman-sitting-on-the-walkway-in-panic-digital-stock-market-financial.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=cU7IzVG5HJHmxh3GXZYkFxp68na_uqtY0cS56JLWuQU=" alt="Tired or stressed businessman sitting on the walkway in panic digital stock market financial background" title="Tired or stressed businessman sitting on the walkway in panic digital stock market financial background" class="object-cover bg-gray-100 rounded-lg md:rounded-xl lg:rounded-2xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://media.gettyimages.com/id/864893078/photo/tired-or-stressed-businessman-sitting-on-the-walkway-in-panic-digital-stock-market-financial.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=cU7IzVG5HJHmxh3GXZYkFxp68na_uqtY0cS56JLWuQU=" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure>What Precipitated the Downgrade? At the heart of this decision lies a fundamental concern: the United States is spending far more than it earns. With annual budget deficits running into the trillions and the national debt exceeding $34 trillion, Moody’s has pointed to a deteriorating fiscal outlook and political gridlock that makes meaningful deficit reduction unlikely in the near future.Put simply: Debt is growing faster than the economy, and there's no clear plan to reverse that trend.Why Main Street Should Care? It’s easy to assume these developments only matter to investors or policymakers in Washington—but that’s a mistake. The cost of government borrowing influences everything from the interest on your student loans to the viability of public programs like Medicare and Social Security.More debt means more money spent on interest payments rather than essential services or infrastructure. Over time, this can translate into higher taxes, reduced public investment, and economic instability.This downgrade is more than just a financial headline—it’s a wake-up call. As the U.S. continues to rely on borrowing to fund its operations, the consequences will increasingly spill over into everyday life. It's crucial that the public—not just policymakers—understands what’s at stake. A fiscally sustainable future isn't just about numbers; it’s about economic opportunity, security, and prosperity for future generations.By: Ahmed Almuhr

The U.S. Credit Downgrade-A Crisis in Confidence?

Metal Shiny Federal Reserve System Symbol on Finance Background (FED)

<figure id="figure-a6rvs6oztm8c2ks0v"><img id="a6rvs6oztm8c2ks0v" src="https://media.gettyimages.com/id/1480024602/photo/interest-rates-and-the-federal-reserve-at-sunset.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=n66qufK1YYuP33AX55L8Iwdj0LSqWmX50S-Vd_KHxBg=" alt="Interest Rates and The Federal Reserve at Sunset" title="Interest Rates and The Federal Reserve at Sunset" class="object-cover bg-gray-100 rounded-lg md:rounded-xl lg:rounded-2xl" style="aspect-ratio: 16/9; object-position: center center;" data-corners="default" data-aspect="16:9" data-caption="" data-positionx="undefined" data-positiony="undefined" data-fullwidth="false" data-mce-src="https://media.gettyimages.com/id/1480024602/photo/interest-rates-and-the-federal-reserve-at-sunset.jpg?b=1&amp;s=2048x2048&amp;w=0&amp;k=20&amp;c=n66qufK1YYuP33AX55L8Iwdj0LSqWmX50S-Vd_KHxBg=" data-mce-style="aspect-ratio: 16/9; object-position: center center;"></figure>The U.S. junk bond market is experiencing mounting pressure as concerns grow over the economic impact of recent trade policies. The additional borrowing cost for junk-rated U.S. companies relative to U.S. Treasury bonds (called credit spread) has surged by 0.56 percentage points since mid-February, reaching a 6 month high of 3.22 percentage points, according to data from Intercontinental Exchange.&nbsp;Investor sentiment has shifted due to fears that the aggressive trade policies introduced by Donald Trump could slow economic growth. The imposition of tariffs on key U.S. trading partners has introduced uncertainty in the market, affecting both businesses and stocks. A recent Reuters poll found that 95% of economists across North America believe the risk of a recession has risen due to the uncertainty surrounding trade policy.&nbsp;This shift follows a strong rally in the high-yield corporate bond market, previously driven by economic strength and record stock market highs. However, recent market volatility has led to a widening of credit spreads.&nbsp;Despite the recent increase in spreads, both investment-grade and high-yield bonds remain relatively stable by historical standards. However, investment banks report that investors have become more selective, walking away from deals they perceive as overpriced. As credit markets adjust to these evolving conditions, investors and businesses must remain vigilant in assessing risks and opportunities in corporate debt markets.Author: Ahmed Almuhr

Insights & Blog

Does Klarna, Affirm, and Other BNPL Services Affect Your ...

401 (K) vs IRA: What's Better For You?

Why Private Equity firms dislike cyclical businesses

The Dark Side of Innovation: Derivatives and Financial St...

The U.S. Credit Downgrade-A Crisis in Confidence?

US Junk Bonds Decline Amid Tariff Concerns