You may be in for a nasty surprise if you have your sights set on a new iPhone. And you should blame Equifax for the headache.
In short, if you were thinking of using Apple’s installment plan and froze your credit because of the Equifax data breach, you may get denied and walk away empty handed. You won’t be able to get the new phone with that payment plan unless (or until) you remember to unfreeze your credit.
Why You Should Be Freezing Your Credit in the First Place
In the wake of the egregious Equifax breach that exposed the private data of more than 150 million people, experts rightly advised everyone to freeze their credit. As the Federal Trade Commission explains, a credit freeze makes it harder for identity thieves to open accounts in your name by restricting access to your credit reports. But most creditors—like banks and credit card companies—will want to see your credit history before approving you for a new account. If those reports are inaccessible, most will deny your request.
Equifax didn’t protect your information, was lazy in patching up its software, and dragged its feet to respond to the theft of Social Security numbers and other personal information. Given Equifax’s callous disregard for your personal information, freezing your credit was, and remains, one the most important steps you should take to prevent identity thieves from opening a new line of credit in your name. It does, however, add some inconvenience to your life.
It becomes a hassle when you need to apply for credit. For example, before you apply for a new credit card, you’ll need to log into each credit bureau, enter a unique PIN, and temporarily unfreeze your credit. This will allow the credit card company access to your credit report to make a decision on your application.
Most people only apply for credit a few times a year, and will recognize the typical situations that require a credit check, such as applying for a mortgage, auto loan, or credit card. However, sometimes you’ll be applying for something that may not look like a loan or sound like a loan, but is in fact, a loan. Like Apple’s upgrade program.
Why Apple’s Upgrade Program Isn’t What it Looks Like
Apple’s upgrade program is underutilized and touts itself as, “the easiest way to upgrade to the latest iPhone.” Instead of paying the full cost of the phone in one lump sum, the cost is spread out over 24 months and includes AppleCare+. Moreover, you’re eligible to upgrade to a new iPhone after making 12 payments.
What’s less obvious is that Apple’s upgrade program is really “an installment loan” from Citizens Bank. If you were to read the Terms & Conditions—as you do this for every agreement, right?—you’ll see that “you will be required to apply for and enter into a 24-month 0% APR installment loan (“Installment Loan”) for the full retail price of the eligible iPhone (“Financed iPhone”), AppleCare+ for iPhone (“AppleCare+”), and if purchased at an Apple Retail Store, applicable taxes and fees.”
But let’s face it, most of us don’t take the time to read the fine print. And even if you do, I wouldn’t blame you if you read the installment loan piece and didn’t automatically think “unfreeze my credit reports.” In fact, it isn’t until you scroll down to Term #9 (or is it Condition #9?) that it says explicitly: “Credit check required.”
How I Wasted an Afternoon Trying to Upgrade my iPhone
I almost made this mistake late last year when I threw in the towel on the sluggish performance of my two-year-old iPhone 6 and decided it was time upgrade. After researching the options and realizing that Apple’s installment plan costs the same as buying the phone outright with AppleCare, I opted for the monthly payment option.
But after waiting for 20 minutes and then working with an Apple Store representative to input all my details for another 15, I had to stop the process when I finally recognized that Apple’s financing plan was a loan from Citizen’s Bank that’d require them to pull my credit. With my credit reports dutifully frozen—thank you Equifax!—I needed to unfreeze them first, lest I apply and be denied.
Unfortunately, the Apple Store representative couldn’t tell me which of the three credit bureaus—Equifax, Experian, or Transunion—Citizens Bank would use to evaluate my credit. So I had to go home, dust off my PIN’s and temporarily unfreeze all three, which took the better part of an hour. Then I had to head back to the nearest Apple Store and start the process all over again.
In the end, this cost me several hours of time, and $5, since TransUnion felt I should pay for the privilege of unfreezing my credit report. Sure, it wasn’t the end of the world, but it became an afternoon of unnecessary frustration.
What You Can Learn From All This
If you’re looking to upgrade to the new iPhone next week using Apple’s installment plan, make sure you temporarily unfreeze your credit before going to the Apple Store or ordering it online. It’ll save you time, aggravation, and the surprise of walking away empty handed.