How Getting a New Phone Could Affect Your Credit Score

Upgrading your phone might seem like a simple purchase, but the way you pay for it can ripple through your financial life, potentially causing a noticeable dip in your credit score.

1. The Hard Inquiry: When you apply to finance a new phone, the carrier or lender will almost always perform a hard credit check. This inquiry is recorded on your credit report and can temporarily lower your score by a few points.
2. Opening a New Account: A new financing plan is a new line of credit. This addition lowers the average age of your credit accounts, a factor that can cause a second, slight dip in your score.
3. Changes to Credit Mix: On the other hand, adding an installment loan for a phone can diversify your credit mix, especially if you only have revolving credit like credit cards. This can be a positive long-term factor for your score.
4. Ongoing Payment History: This is the most critical step. Making your monthly phone payments on time will build a positive payment history, which is the single most important factor in your credit score and will help it improve over time.

How Much Will Getting a New Phone Affect Your Credit Score?

When you get a new phone, several factors can influence your credit score. Here are the key things to keep in mind:

• Hard Inquiry. Most carriers run a credit check before approving you for a new phone or plan. This hard inquiry can cause a small, temporary dip in your credit score for a few months.
• New Credit Account. Financing a new phone adds a new account to your credit report. This can lower the average age of your accounts, which might slightly decrease your score initially.

How You Can Avoid Getting a New Phone Affecting Your Credit Score

Buy the Phone Outright

The most straightforward method is to purchase your new phone outright. Paying the full price upfront means you avoid entering into a financing agreement with the carrier. This eliminates the need for a hard credit inquiry, as the transaction is a retail purchase, not a loan.

Utilize a BYOD Plan

If you already own an unlocked phone, consider a "Bring Your Own Device" (BYOD) plan. While a soft credit check for service may still occur, you completely sidestep the hard inquiry associated with financing a new handset directly from the mobile provider, protecting your score.

Ways to Improve Your Credit Score

Improving your credit score is an achievable goal that comes down to consistent, positive financial behaviors. By following some proven methods, you can begin to see meaningful changes in your score within three to six months.

• Monitor your credit reports. Regularly check your reports from Experian, TransUnion, and Equifax to identify and dispute any inaccuracies that could be hurting your score.
• Set up automatic payments. Your payment history is the most significant factor in your score, so ensure all your bills are paid on time by automating them.
• Reduce your credit utilization. Aim to use less than 30% of your available credit, as a lower ratio signals to lenders that you are a responsible borrower.
• Become an authorized user. You can be added to the credit card account of someone with a good credit history, which can help build your own credit profile.
• Diversify your credit mix. Having a combination of different credit types, such as revolving credit and installment loans, shows you can manage various forms of debt.
• Limit hard inquiries. Avoid applying for too much new credit in a short period, as multiple hard inquiries can temporarily lower your score.

The Bottom Line

While financing a new phone often requires a hard credit inquiry that can temporarily lower your score, making consistent on-time payments can help build your credit history in the long run.

Frequently Asked Questions

Will upgrading my phone with my current carrier hurt my credit?

Not usually. If you're a long-time customer in good standing, carriers often skip a new credit check for a simple device upgrade, especially if you buy it outright.

Do soft credit checks for phone plans appear on my report?

Yes, soft inquiries are recorded on your credit report, but they are only visible to you and do not impact your credit score whatsoever.

How long does a hard inquiry for a new phone stay on my credit report?

A hard inquiry from financing a new phone or starting a new plan remains on your credit report for two years, but it typically only impacts your score for the first year.