Can Financing a Cellphone Help You Build Credit?

Quick Answer

Financing a cellphone with a carrier generally won’t help your credit. However, if you financed the phone with a loan or credit card, including one from a cellphone maker or big box store, that could help your credit if you make your payments on time.

Relaxed young woman using credit card and mobile phone while sitting on the couch.

Financing a cellphone could help you build credit, but only if your account gets reported to Experian, TransUnion and Equifax—the three credit bureaus that maintain your credit reports. Most commonly, this happens if you take out a loan or use a credit card to finance the purchase. Phone carriers may check your credit before approving you for a phone plan or financing, but they might not report your account to the bureaus, so your payments won't affect your credit.

How Cellphone Financing Works

Financing a new cellphone will work differently depending on where you buy the phone and the type of financing you use:

  • Wireless carrier: Phone carriers often offer installment plans that add the loan payment to your monthly phone bill. The loan might not have any financing fees or interest, but you could have to pay it off in full if you want to leave the plan early. Alternatively, some carriers give you a promotional credit for the price of the phone that's divided into monthly increments. You may lose these monthly credits if you pay off the phone early, and may have to pay the difference if you want to leave the plan.
  • Phone manufacturers and retailers: Phone manufacturers and retailers may partner with lenders and credit card issuers to offer financing. Review the terms carefully. Some financing has low or no interest, which could help you save money, but others have deferred interest financing. With deferred interest, you may have to pay all the interest that accrued since the purchase if you don't pay off the entire balance during the promotional period.
  • Credit card: You could finance the phone purchase on your own with a credit card. If you have or open a card with a 0% annual percentage rate (APR) offer, the purchase won't accrue interest during the promotional period. However, any remaining balance will start to accrue interest at the card's standard rate when the promotional period ends.
  • Buy now, pay later (BNPL): You also might be able to use a BNPL plan to finance a new phone. With a pay-in-four option, you could make four equal payments without paying interest or fees. Some BNPL providers also offer longer-term repayment plans that charge interest but have lower payments.

How Financing a Cellphone Affects Your Credit

Financing a cellphone might affect your credit in several ways:

  • A credit inquiry might hurt your credit a little. Many companies check your credit when you apply for a postpaid plan or want to finance a phone. Often, this results in a soft inquiry if you're using a BNPL or buying the phone from the carrier, which doesn't affect your credit scores. But if it leads to a hard inquiry, which generally happens when you apply for a new credit card or personal loan, that might hurt your credit scores a little.
  • Monthly payments can help or hurt your credit. Many banks and credit card issuers report your credit account and monthly payments to the credit bureaus. On-time monthly payments could help you build credit, while missing a payment could hurt it. Cellphone carriers and BNPL providers generally don't report to the bureaus.
  • Collection accounts could hurt your credit. If you fall behind on your payments, the company might close your account and sell or transfer it to collections. Even if the account wasn't showing up in your credit history before, the collection account could get reported and hurt your credit.

Even if your on-time payments won't affect your credit scores, missing a payment could still affect your ability to get financing from that company in the future. The carrier also might charge you a late payment fee if you miss the bill's due date.

Alternative Ways to Build Credit

Even if you're getting credit for paying off your cellphone, having several credit accounts and a long history of making on-time payments can be important for getting an excellent score. Here are some additional types of accounts you may be able to use to improve your credit:

  • Secured cards and loans: If you're new to credit or have a low credit score, you might want to start with a secured credit card or credit-builder loan. You'll have to set aside a refundable security deposit to open or use your account, but you can find low-cost options with companies that will report your account and payment to all three credit bureaus.
  • Lending circle loans: Some nonprofits and community organizations offer lending circles that you can participate in to build credit. Each person makes a monthly payment to build their credit, and one member of the circle receives the total amount from the group. The recipients rotate until everyone receives one payment. The loans often have no fees or interest, which could make them a good option for building your credit and savings at the same time.
  • Unsecured credit cards: Once you have a fair to good credit score, you should be able to qualify for unsecured credit cards. These don't require a security deposit and might offer lower fees or more rewards than secured cards. There are many types of unsecured cards, including travel and cash back cards.
  • Rent payments: Many landlords and property management companies don't report your rent payments to the credit bureaus. However, you can use third-party rent reporting services to add your on-time rent payments to your credit reports.

Building credit takes time, but the more positive information you can add to your credit reports, the better. Similarly, try to avoid missing payments or letting accounts fall into collections, as that can hurt your credit. If you're struggling to afford payments, contact the company to see if they can help and look into general financial assistance programs that might lower some of your other bills.

Use Your Cellphone Bill Payments to Improve Your Credit

Regardless of whether you finance your phone, your monthly phone payments could help you build credit if you use Experian Boost®ø. With Experian Boost, you can connect your bank account and add your monthly rent and utility bills to your Experian credit report, along with certain insurance and streaming service payments. Doing so could help you see an immediate increase in your FICO® Score .

How Good Is Your Credit Score?

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