Will Financing a TV Help Build Credit at All?

Financing a big-ticket item such as a television might seem like an easy way to build your credit, but it could destroy your credit rating instead. Also, financing is the most expensive way to purchase a depreciating good such as a TV. You could build some credit through financing a TV, but this is usually one of the worst ways to go about it.

In-store Financing Could Hurt You

If you want to finance a TV through in-store financing, just applying for credit with the retailer will hurt your credit score, because inquiries into your score due to an application you fill out hurt your score about five points, according to CreditNet. Credit inquiries affect your credit score for 12 months and stay on your report for two years.

Effects

When you opt for in-store financing, the retailer almost always opens a new credit card account. If you have never had a credit card, this starts your credit history, but on a bad note. Retail credit cards usually have the most lenient credit requirements but also very low limits. In the most likely scenario, the store will open a card for the exact amount of the TV and charge it immediately. This will lower your score because it maxes out your only credit card. The FICO score weighs how much of your credit to debt you use heavily. If you max out your card, you will have the highest credit utilization ratio possible: 100 percent.

Other Considerations

If you have other credit accounts, opening a new card will lower the average length of your credit history, which counts for 15 percent of your score, according to BNet. Even if you plan to pay off your purchases within the month, you might feel tempted to let the balance roll over, or some hardship might force you to hold off on payment. The longer you have a maxed-out credit limit, the more future lenders will consider you a high risk.

Alternative to Financing

Instead of financing a TV outright to build your credit history, put it on layaway and take out a secured card or get a retail card, but do not put the TV on it. Layaway won't affect your credit, but you will make payments every week until you pay it off. If you decide against the purchase you can always get a refund. You can apply for the retail card to start building credit, but only put small purchases on it and pay off the balance every month. You could also go for a secured credit card, which requires you to match the credit limit with collateral.