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Financing a cellphone may help you build credit if the creditor reports your account and payment activity to a credit bureau.
However, even when that's not the case, you may need good credit to get approved for a financing offer. You'll also still have to follow through with your payments, as a phone account in collections can still wind up hurting your credit.
How Cellphone Financing Works
As phones have become more expensive, consumers may want or need to finance the purchase and pay over time. Some even choose to lease a new phone, which allows them to make modest monthly payments and easily upgrade to a newer model each year.
You may be able to find financing by working with the phone's manufacturer or a wireless carrier, or using an alternative form of financing (such as a credit card) to buy the phone. Here are how some popular financing options work.
Your wireless carrier may offer a variety of payment plans and leasing options when you buy a new phone through them.
You may be able to sign up for a monthly installment plan and pay off your phone over time without paying any interest. Some carriers may offer special discounts if you pay for your new phone with a monthly installment plan. However, the discount is typically applied to your monthly bill, so you may lose some of the savings if you switch carriers.
There are also payment and upgrade plans, which are a type of installment plan that allows you to periodically upgrade to a newer phone by trading in your current model. Depending on the carrier, these may be leases with the option to buy or payment plans that result in you owning the phone outright if you don't opt for an upgrade.
With a financing, lease or upgrade option, you may have to make a down payment depending on your credit. Additionally, you could have to pay taxes on the full purchase price when you start one of these plans.
Samsung offers a line of credit that you can use to purchase its phones, PCs, wearables, accessories, TVs, appliances and more. With a revolving line of credit, you can borrow money, repay the loan and borrow again without having to reapply—similar to how a credit card works.
If you're buying a phone, you may be able to qualify for a 0% annual percentage rate (APR) as long as 36 months. You can also upgrade your phone each year and get credit for your old device.
But beware: Some of Samsung's financing offers have deferred interest rather than no interest. This means if you don't pay off the balance by the end of the financing period (which may require larger than minimum payments), all the interest that would have accrued during that period gets added to what you owe.
Apple offers two consumer financing options with either the Apple Card or Barclaycard Financing Visa®.
The Apple Card gives you 3% cash back on Apple purchases and could let you pay off your new iPhone over 24 months without paying additional interest. The monthly payment amount gets added to your minimum payment if you also use the card for other transactions. You can also avoid interest on purchases if you pay off your non-installment-plan balance in full each month.
Another option through Apple, the Barclaycard Financing Visa®, offers six-, 12- or 18-month periods of deferred interest depending on your purchase amount. To qualify, you'll need to make the purchase within 30 days of opening your account.
Google Store Financing
Google offers 24-month, 0% APR financing on Pixel phone purchases via a Google Store Financing credit card issued by Synchrony Bank. Making your monthly payments should allow you to pay off the phone without any additional interest in 24 months. However, don't use the card for other purchases, as a high 29.99% APR applies to regular purchases.
How Financing a Cellphone Affects Your Credit
If you're financing your new cellphone purchase, or leasing one, you might experience several impacts on your credit.
First, the creditor (whether it's the company or a partnered bank or credit card issuer) may check your credit when you apply. The resulting hard inquiry could lower your credit scores, but often, a single hard inquiry results in a minor drop that dissipates over a few months.
Then, your monthly payments may help you build a positive credit history if you're making them on time. Alternatively, they could hurt your credit if you miss a payment. For your new account to impact your credit scores, the creditor will need to report the account to a credit bureau. Many banks and credit card issuers do this, but wireless carriers might not.
If you fall far enough behind on your payments, the creditor may 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.
Alternative Ways to Build Credit
Making credit card and loan payments on time is often the most direct way to build credit. However, in recent years, it's become easier to build credit with alternative types of payments.
For example, you may be able to get your rent payments reported to the credit bureaus and added to your credit reports. Experian also offers the free Experian Boost™† tool, which you can use to add cellphone and utility bill payments to your Experian credit report. These payments can then get included in credit score calculations and may improve your scores.
Even if you don't use financing to purchase your phone, your monthly cellphone plan payments can help you build credit if you sign up for Experian Boost.
Is Financing a Cellphone Worth It?
If you're buying a phone and can afford to pay for it in full upfront, you still may want to take advantage of a zero-interest financing offer to spread out the payments over time and keep more of your cash available. You can also choose to pay off the phone early if you want to own it outright before the end of the payment plan.
However, you'll need good credit to qualify for financing, especially if you don't want to make a down payment. You can see where you currently stand by checking your Experian credit report and getting a FICO® 8 credit score based on your report for free.
All information about the Apple Card, Barclaycard Financing Visa® and Google Store Financing credit card has been collected independently by Experian. The product details on this page has not been reviewed or provided by the card issuer.