Does financing a phone build credit

By Matt Mayerle
Modified on May 8, 2023
does financing a phone build credit

Whether we like it or not, our credit score follows us wherever we go and impacts innumerable facets of our lives, from applying to lease an apartment to buying a new car. For this reason, borrowers constantly pursue an excellent credit score that’s impressive enough to open up further financial opportunities to them.

Building credit can be a tricky task, especially if you don’t have much of a credit history or are trying to rebuild a damaged credit report from the ground up. Oftentimes, you need good credit to get opportunities to build it, and it can be challenging to obtain new credit when you have a sparse report or bad credit score.

More Than One Way To Build Credit

Luckily, there are many ways to build credit other than just opening new credit card accounts. Financing options with significant purchases like financing a new phone can build credit, depending on what phone provider you are purchasing your cell phone from.

When it comes down to it, what is most important in building your credit is consistent on-time payments and engaging in responsible practices with financial products that get reported to the three major credit bureaus.

We can walk you through how financing a new cell phone purchase with an installment plan could affect your credit and why. And, if you need additional ways to make a favorable improvement on your credit score, we have you covered with several ways you can establish a solid foundation in your credit history.

What Is Included in Your Credit Report?

Understanding precisely what is included in your credit report is an excellent way to determine how best to build your credit. It’s helpful to know what goes into the compilation of your report and the calculation of your credit score to recognize why you need to do a particular thing to improve your credit rather than just knowing you’re supposed to do it.

There are four categories of information on your credit report:

1. Personally Identifiable Information (PII)

This section will include information used to identify you, like your name, address, Social Security Number (SSN), date of birth, and employment details.

The PII section does not affect your credit score. It simply serves the purpose of tying you to your report. The facts included in your PII are updated through the information you provide to lenders when you apply for new credit.

2. Credit Accounts

All of your credit accounts will be reported here, along with pertinent details pertaining to each account. Lenders provide the credit bureaus with the type of account (credit cards, mortgage loans, auto loans, payday loans, etc.) when you opened the account, the credit limit or loan amount, the account’s balance, and payment history. Your account history will include whether you have late or missing payments.

3. Credit Inquiries

Every time you apply for a loan or a new line of credit, you authorize the lender to do a credit check to approve or deny your application. When this happens, it creates a hard inquiry on your report. Too many of these can negatively impact your credit score.

4.  Public Record and Collections

The credit bureaus that compile your report also collect public records from state and county courts deemed relevant. Most notably, your credit report will include all bankruptcy filings and their status, along with overdue debts that have been sent into collections.

Do Cell Phone Financing Plans Report to Credit Bureaus?

Financing the purchase of a new cell phone could help build your credit if the cell phone company you finance your phone with reports credit lines and payment activity to at least one of the credit bureaus.

Not all of them report on financing accounts, but you can directly ask the company offering the payment plan what they do and don’t report. Those who don’t report your account to credit bureaus will still likely check your credit to approve you for their financing offer. This could show up as a hard inquiry on your credit reports.

In addition to this, even if they don’t report your timely payments, the creditor will likely report late or missed cell phone payments to a credit bureau. It is vital that you don’t assume you are safe from a negative impact just because you’ve confirmed that the financing plan you are using for your new cell phone does not report credit building marks.

How Financing a Cell Phone Might Affect Your Credit?

As we mentioned above, if your creditor reports to the various credit bureaus regularly regarding your account, then your cell phone financing plan could positively impact your credit score by making timely payments. Every payment added to your credit history will build credit over time and reflect well on your financial reliability.  

Keeping in mind the credit check is likely added to your report from the creditor approving your financing application, you might see an initial drop that will affect your credit score, but that will be a short-lived impact once you start making your monthly installment payments on time.

On the other hand, missing cell phone payments or regularly making late payments on your financing plan could leave negative marks on your report and seriously damage your credit score. Falling far enough behind in your monthly payments could also lead the Creditor to send your account into collections.  A collection account will be reported to the major credit reporting bureaus immediately.

Other Ways To Build Your Credit

If you need to build credit from the ground up or repair a damaged credit score, there are a myriad of other ways you can do this, in addition to financing purchases from cell phone providers. You can employ strategies to establish a good credit history regardless of what your credit currently looks like.

Here are some of the credit-building tools you can use to work your way to a good credit score slowly:

Become an Authorized User

If they are willing, having a family member or partner add you as an authorized user on their credit card is a fantastic way to build credit or improve credit with minimal hassle. When you become an authorized user on someone else’s credit card, that person’s payment history gets added to your report.

If the primary user has a good history and makes all their payments on time, it will reflect on your credit and make a marked improvement soon.

Apply for a Secured Credit Card

One of the best ways to help you build credit from scratch or recover from bankruptcy is a secured credit card. When getting a secured credit card, you put down a cash security deposit to cover the credit limit.

By borrowing against your own money, you can build credit with no prior payment history. It is a great stepping stone until you have a solid enough foundation to apply for unsecured credit cards.

Utilize a Co-Signer

Getting a loan is difficult if you have not already established credit or your credit score is not in the best shape. However, you can use a co-signer to be approved for loans or even for unsecured lines of credit.

The co-signer is responsible for the balance on the account if you default or if you make late payments regularly, so you will need to discuss the implications thoroughly with your co-signer. If you are on the same page, paying on a co-signed loan can be an excellent way to build credit.

Build Credit From Bills You’ve Been Paying

You can utilize services that allow your credit to benefit from bills that you already pay by reporting them to the credit bureaus. Services like Experian Boost take bill payments that usually don’t go on your credit, like cell phone payments and utility bills, and add them to your payment history to boost your credit score and help you build credit. 

The best approach to help you build credit is consistency and making wise financial decisions. Keep pursuing ways to improve your credit scores and avoid actions that might be a detriment to it. If you do that, you will end up with credit reports that will impress any creditor.


What’s in your credit report? 
Can Financing a Cellphone Help You Build Credit? 

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