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February 08, 2019

How Your Credit Factors into Your Cell Phone Purchase

credit card and smartphone

A new smartphone is a major purchase. Many of today’s most popular smartphones are priced around $700, while some cost more than $1,000. Let’s be honest: not everyone has that kind of cash to shell out up front. Cell phone financing is a good option if you want a new phone but don’t want to (or can’t) pay for it right away. However, if you decide to finance a cell phone, your carrier will likely check your credit score before offering you a contract. Here’s what you should know before you sign the dotted line.

What is a good credit score?

Any time you buy something that requires you to make a regular payment — for example, a car, a home, or an Internet service plan — someone is keeping track of whether or not you’re making those payments on time. Making timely payments keeps your credit rating high; missing them lowers your rating. People with good credit appear to be less of a financial risk to lenders than those with bad credit.

So, where do you fit in? Your credit score depends on credit rating companies, each of which uses different algorithms to come up with a “grade” that typically falls somewhere between 300 and 850. That number is used to rank you. Excellent credit is defined as having a score of 750 or higher. Bad credit is considered anything below 600. According to the credit reporting firm Experian, the average credit score in the United States in 2017 was 675.

Running a credit check can negatively impact your credit score

If you’re going to explore smartphone financing, wireless carriers will likely run a credit check to see where you fall. Credit inquiries make up 10% of your credit score. Other factors that impact your score include:

  • Payment history
  • Amounts you owe
  • The length of your credit history
  • How many lines of credit you have

Ironically, a credit inquiry from a lender can lower your overall credit score, particularly if you have been applying for credit at several different places. Too many inquiries in a short span of time may signal that you’re taking on too much debt. In short, think before applying for credit.

Check your credit score, risk-free

Before you take the leap into cell phone financing, make sure you know your credit score. If you’re unsure where you sit on the credit score spectrum, there are ways to check your score without being penalized. Each of the three major credit reporting agencies — Equifax, Experian, and TransUnion — offer consumers one free credit report per year.

How your credit score affects your cell phone purchase

If you have good credit, you’ll likely get the best deal on cell phone financing. If you have average credit, you may have to put down a deposit and accept a higher interest rate. Those with poor credit may want to consider getting a prepaid plan, which lets you pay up front for a cell phone that comes with a fixed number of minutes over a certain number of months.

Some companies offer special payment plans for people with poor credit or those who do not want to have their credit score checked. Other carriers encourage people with bad credit to get back on track by putting money down on a discounted phone up front, and then, if you make payments on time for a year, upgrading to a postpaid plan.

Xfinity has a range of smartphone financing plans, no matter your budget or credit. Learn more about our device payment plans.

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