Two women looking at a cell phone.

Why getting a cell phone may depend on your credit

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Until recently, you could buy a cell phone in one transaction: either come up with a couple hundred bucks and pick a plan, or come up with several hundred more bucks to pay for an unlocked phone outright. Here’s what’s changed and why you may need to take a closer look at your credit.

What’s changed?

Most retailers will still let you pay for the entire cost of your phone in one fell swoop, but just like it’s always been, that option can cost nearly $1,000 for some top-of-the-line smartphones. What has changed is the up-front, lower-cost/ free option most people choose. For the most part, that option has been replaced by monthly phone payment plans.

Why you’re seeing monthly phone payment plans now

Many smartphone makers no longer see the need to pay carriers part of the cost of their phone to encourage them to sell it. After all, people are buying plenty of smartphones these days. And because there are now several non-contract phone options, you no longer have to commit to a specific carrier coverage plan (coverage plans generally last for 2 years). Essentially, retailers and consumers are starting to view getting a phone and getting service as two separate things.

Why retailers are more credit-focused

With customers’ cost spread out over several months, reduced payments from smartphone makers, and the expectation consumers will not be able to (or want to) pay the full cost of an expensive phone up-front, retailers now have to turn their attention to whether those customers will actually make their payments. That’s why retailers are turning to credit checks more than they had before, especially when it comes to new customers. In fact, some payment plans actually take the form of a zero-interest personal loan from a bank.

What you should do.

Since getting a cell phone may hinge on your credit health:

Check your credit. If you’re considering getting a new phone, check your credit first. You’ll get an idea of where you stand before your credit is pulled. Such pulls are “hard inquires” which may harm your score, especially if your credit report shows several of them. Signing up for a credit monitoring service ahead of time can help you track credit score changes.

Read the fine print and ask up-front. Especially if you’re going for top deals or top phones, read the fine print on the offer. If you see words like “qualified” or “pending credit check” a hard credit inquiry may occur. It also doesn’t hurt to ask if there’ll be a credit check before the retailer starts getting too far into the specifics.

Make your payments on time. Missing cell phone payments may harm your credit health. Whereas, if your payment plan is a personal loan, your credit health may benefit from making your monthly payments on time. If it’s another financing arrangement, it may not. Either way, you should try to pay your bills on time!

Bottom line: Buying a cell phone is just one more reason to get in the know about your credit.

Take the next step toward financial health

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