Does Financing a Phone Build Credit?

Smartphone prices around the world are always increasing, making purchasing a cell phone in cash difficult. so, if you’re like many people in the United States, you’ve probably considered financing a phone. We often get asked: Does financing a phone build credit? We will answer this question in much detail below.

Does Financing a Phone Build Credit?

In most cases, financing a phone through a wireless carrier will not help you build credit. When you finance a phone, your account status is not reported to the credit reporting bureaus. Therefore, whether you make your payments on time or don’t make them at all, they will not be reported to the credit reporting bureaus and will therefore not affect your credit.

That said, with some phone makers, such as Samsung and Apple, financing a phone with them directly may help you build credit, so if you make your payments on time, you will build good credit.

This is so because when you finance a phone through Apple or Samsung, they are essentially opening a line of credit for you, which is usually reported to the credit reporting bureaus as would a credit card. In such a situation, making payments to finance a smartphone will help you build credit so long as you make your payments on time.

Financing a Smartphone With a Wireless Carrier

When you purchase a cellphone or smartphone and agree to a payment plan with a wireless carrier, such as AT&T, T-Mobile, Sprint, or Verizon, your phone payments will not help you build credit because phone payments and bills are not reported to the credit reporting bureaus, so if you think that making phone payments will help your credit, you’re mistaken as they will not help your credit. The same applies if you miss payments. If you miss payments, the missed payments will not affect your credit as your account is not reported to the credit reporting bureaus.

Financing a Smartphone With Apple

If you want to finance an iPhone or any apple product with Apple, Apple will open a credit card through which you can finance your phone. The Apple Card is reported to the credit reporting bureaus. So, making payments on an iPhone will help you build credit. If you miss any payments, you could cause significant damage to your credit. This is so because the status of your Apple Card is reported to the three major credit reporting bureaus. As such, your payment history will affect your credit score.

Does Financing a Phone Affect Your Credit?

When you first open a wireless account or apply to lease or finance a smartphone, the wireless carrier may conduct a credit check. That said, wireless carriers often conduct what is known as a soft pull or soft inquiry to review your credit when determining whether to allow you to finance or lease a phone. A soft inquiry does not affect your credit score, as such, it will not lower your credit score.

That said, if you’re financing a phone directly with Apple or Samsung, a hard inquiry may be placed on your credit report. This is so because Apple and Samsung open a line of credit for you to allow you to finance one of their smartphones. A line of credit almost always results in a hard inquiry on your credit report.

A single hard inquiry could lower your credit score by a few points, but the impact is negligible and shouldn’t keep you up at night.

Also, if you finance a smartphone through Apple or Samsung, missing a payment could hurt your credit score because the status of your line of credit account is reported to the credit reporting bureaus. As such, if you make payments, you will build credit, and if you miss payments, you will damage your credit.

Does Paying Your Phone Bill Build Credit

Now that you know that leasing or financing a phone with a wireless carrier does not build credit nor does it affect your credit, does paying your phone bill build credit? No, paying a phone bill will not help you build credit. That said, Experian has launched a service known as Experian Boost that allows you to improve your credit score whenever you pay your phone bill. However, a phone bill will not affect your credit unless you subscribe to Experian’s service. Also, paying or failing to pay a phone bill will not affect your credit score with Transunion and/or Equifax.

Other Ways to Build Credit

If you’re just starting to build your credit or you have bad credit, one of the best ways to build credit is to obtain a secured credit card. A secured credit card works the same way as does a regular credit card, the only difference between the two is that with a secured credit card, you will have to place a security deposit with the card issuer.

If you use the secured card as agreed, the security deposit will usually be returned to you within 12 to 18 months. However, if you stop making your payments on time, the security deposit will be used to satisfy your outstanding balance.

That said, if used properly, a secured credit card will help build your credit just as would a regular unsecured credit card.

So, if you want to build credit without financing a phone to build credit, a secured credit card is a great way to do so.

Credit Score Planet Frequently Asked Questions

1. Will financing a smartphone help my credit?

Financing a smartphone or any phone through a wireless carrier will not help your credit because your account status is not reported to the credit reporting bureaus. However, if you finance a smartphone through Samsung or Apple, making payments on your phone could help your credit because they typically open a line of credit on which you make payments.

2. Does paying a phone bill help your credit?

No, paying a phone bill will not help your credit. However, if you signup for Experian Boost, paying your phone bill could help your credit. That said, generally speaking, paying a phone bill will not help your credit.

3. How can I improve my credit score?

You can improve your credit score by making payments on your loans and credit cards on time, reducing the balances on your accounts, keeping old accounts open, and refraining from submitting too many credit applications within a short period of time.

4. Can a phone company ruin your credit?

Yes, a phone company or wireless can ruin your credit. The way this typically happens is that if you leave an unpaid balance on your account for too long, the phone company may sell the unpaid debt to a collection agency. The collection agency will then add a collection account to your credit report while attempting to recover the debt. A single collection that’s added to your credit report can cause significant damage to your credit.