I recently bought product "X". This was something I had saved for and I was prepared to pay the full amount. However, the store had an offer of a 12 month payment plan with 0% interest. I'm in my twenties and have good credit but relatively limited credit experience. I thought this would be an easy way to help bolster my credit score. I was extended a line of credit at the store for $11,000 of which $3,000 was used for the purchase. I understand that your credit score is made up of both credit utilization and past history. Assuming I make all monthly payments on time and accrue no interest, is this a good idea or am I better off paying in full and not acquiring any debt?

1 Answer 1


If the loan/line of credit is reported to the credit agencies this can help you. For those 12 months you will show that you have an outstanding loan, and that it is being paid on time. The fact that you were only loaned 27-28% of the maximum amount means that you will have a low utilization rate for this credit line.

When the item is finally paid off, you have to decide what you want to do with that line of credit. Closing it will lower your score, and will change your utilization rate. Though these will be short term impacts.

If you make sure that you never are late, this deal can be a good thing. The risk is that some 0% specials have a provision that if you are late the interest rate they charge is high, and they charge you the interest that they forgave. Make sure that last payment is early, so that you have zero risk. Even one day late could add a significant penalty.

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