Is Your Credit Score Affected by Layaway?

If you don’t have the cash to buy an item outright, you still have a few choices. A credit card is one of the most common methods, as you can receive the item immediately and pay it off over time. Layaway is another option.


Layaway programs allow you to pay off an item over time. Until you pay off the layaway item in full, you will not be able to access your purchase. Moreover, there are some key differences between credit cards and layaway, including how they affect your credit score.



Layaway and credit cards let you pay off a purchase over time. There is a minimum payment you must make each month, and you may face penalties if you don’t make your payments. After that, the similarity ends.


With a credit card, your purchase is immediately processed. The item is ready for pick up immediately. When you purchase something, the amount is added to your credit card balance, and it can accrue interest if you don’t pay it off in full by the next billing cycle. Credit cards can be used to make ongoing purchases as well.


Layaway involves paying the retailer the amount of the purchase on an installment basis along with any additional fees associated with the program. Layaway programs usually require a down payment, often calculated as a percentage of the purchase price. The retailer holds onto the item for a specified period of time and won’t release it to you until the item has been paid off. Depending on the retailer, you may be able to pay it off early.


Layaway covers only a single purchase. Unlike a credit card, you cannot add additional items.


You may be able to get a refund of the payments you’ve made toward the layaway purchase if you cancel or stop payments. However, the retailer may charge you a cancellation fee and keep any other fees you’ve paid.



Your credit score is not affected by layaway, unlike credit cards. You won’t have any hard inquiries on your credit report since the retailer doesn’t check your credit. You won’t see a payment history on your credit report for layaway payments since they’re not reported to the credit bureaus. You won’t be penalized for making late payments either.


Layaway plans don’t show up as debt on your credit report, and they won’t affect your credit utilization, amount of debt, or age of your accounts. Therefore, layaway does not affect your credit history or credit score.



Layaway is inconvenient if you need something right away, but it is a smart option for budgeting. Rather than going into debt for a big purchase, you can fit your payments into your existing budget. Layaway also helps you avoid opening credit cards that you can’t handle or taking on debt that you can’t afford.


But if you have the means, you may find that a credit card is more convenient. You can improve your credit score over time by making timely credit card payments. On the other hand, if you have trouble managing debt or making payments on time, a credit card might cause you to have problems.


If you’re struggling to qualify for a credit card, but want to build credit instead of buying things on layaway, consider getting a secured credit card. A security deposit is required for these cards, but they are easier to qualify for, and they build credit just like a traditional credit card.


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