Can You Finance a Phone with Bad Credit?

Remember when a cell phone was considered a big luxury rather than a necessity?

Back in the day, high-powered businessmen would pay thousands of dollars to carry around a brick that was slightly more effective than two tin cans tied to a string. Throughout the years, cell phones have become much more advanced, with internet access and apps for everything. Presumably, the call quality has gotten better, although only robocallers seem to actually make phone calls anymore, so who really knows?

Regardless, having a smartphone is essential these days, as so much of modern society centers around the capabilities of our mobile devices. So it should be easy to get one, right? Not necessarily, particularly if you have bad credit. (For more on bad credit loans, be sure to read through the TheLending Guide to Bad Credit Loans here.)

Credit scores and cell phones: How are they related?

When you try to enter into a cell phone contract, many providers will perform a credit check.

It makes sense. The reason to check a credit score, generally, is to measure how reliable an applicant has been about paying down their debts and managing their credit. If you’ve generally been paying your bills on time, odds are greater that you’ll also pay your phone bill on time.

On the other hand, if you’ve previously run into trouble paying your bills, a provider may think you won’t treat their invoices with any greater value. The provider may offer you a worse rate — if it is willing to offer you a contract at all.

While a low credit score doesn’t necessarily mean that a person is irresponsible, that is often the assumption a lender or service provider will make, at least when it comes to the subject’s likelihood to pay their bills.

If you think your credit score won’t allow you to obtain a cell phone, you are not alone: In 2015, T-Mobile opted to stop checking their existing customer’s credit scores before renewing their contracts. Instead, they decided to base contract renewals on a customer’s bill payment history in the last year. T-Mobile said the change was due to the large number of American customers -- more than half -- that didn’t have a credit history allowing them to get the best of the carrier’s plans.

Credit checks and your score

There’s a good chance a credit check with a phone carrier will be a hard credit check. That means it will cause temporary damage to your credit score. If you are given the option, a soft credit check is always going to be better for your credit score -- it shouldn’t ding your score, but you may not have a choice between which type of credit check the service provider runs on you.

Improving your credit score by paying off your debts, paying all your bills on time, and using credit cards responsibly will allow you to receive better options when it comes to phone plans. But it can take time to build up a good credit score, and you probably can’t go that long without a phone. So what are your options?

You can pay more upfront

Your cell phone provider may allow you to pay more upfront when purchasing a new phone. There are pros and cons to this: On one hand, it will require more of your available funds to cover the down payment. Checking the length of the phone’s warranty may also be a good idea, as you don’t want to lose that upfront investment if the phone gets damaged.

On the other hand, since you’ve paid off a larger percentage of the phone, your monthly payments may be lower than a person with better credit who chooses to pay less at checkout.

Paying more upfront when you have bad credit is actually quite common. It can help you rent an apartment and sign up for utilities, or positively impact the interest rates on your mortgage. With some services, like dental work, you may be able to pay less overall if you’re willing to pay for everything up front and in cash.

This won’t always be possible, however. If your credit is low enough, you may not be able to qualify for any phone financing plan at all -- at least not with certain providers.

Many companies will give you the option to prepay for your entire phone use. These prepaid plans may lack certain options, like unlimited data or talking time, but they may be cheaper and therefore, better for your checking account than a standard contract plan. 

Shop around 

If you do consider a prepayment plan, be sure to shop around at many different providers to see which ones specialize in these kinds of offers. Companies like Metro PCS and Boost Mobile specialize in offering phones to lower-income customers, but at the same time, may not offer the same coverage as more mainstream carriers.

Exploring different providers and payment options can help to identify which plan is the most affordable for you, but the big providers may be less likely to offer good deals to people with worse credit. Google can be your friend in this case. 

Aside from T-Mobile, carriers like Sprint may let you get around a credit check if you already have an iPhone or Samsung Galaxy or Motorola or tin can when you walk into the store. It’s possible that buying a used phone on the secondary market could lead to a better outcome for your wallet, but you need to be careful you’re not getting scammed. 

Consider a cosigner

If the purchase price of a prepaid phone or plan doesn’t work for you, consider reaching out to friends or family. Maybe you are close to someone who trusts you, has good credit, and would be willing to cosign on your account. You can also look into joining a relative’s family plan and paying them back each month, as necessary.

Phones and finances

Fixing your financial situation can feel like a Catch-22: You need a better job to make more money, but you need a phone to land that job and you need more money to buy a phone. But hopefully, this advice can help you on your journey to better credit and a better phone plan.

This article was updated February 22, 2020. It originally published on May 17, 2018.