Smart SpendingSmart Spending

Does buying on layaway affect your credit?

The option to buy on layaway for this holiday season may be a way to make sure you get the gifts you want to give without busting your budget. But what if you can't make the payments?

By Oct 21, 2013 11:41AM

This post comes from Gerri Detweiler at partner site logoIf you’re looking at a tight holiday budget again this year, the ads retailers are rolling out for layaway may have caught your attention. With no interest, no credit check and relatively inexpensive fees, putting an item on layaway can appear to be a good way to spread out your holiday spending and make sure you don’t go into debt buying the gifts you really want to give.

Gift © Brian Hagiwara, Brand X, CorbisBut what about your credit? Will layaway affect your credit scores? What happens if you can’t keep up with the required payments?

First, a quick overview of how layaway works: To put an item on layaway, you must pay an initial minimum deposit, which varies by company. You’ll also likely be charged a service fee, usually $5 to $10. You will then have a certain amount of time to make payments toward the total purchase price; typically between one and three months. Once you’ve paid in full, you take your purchase home: It’s yours.

If you change your mind or can’t make the scheduled payments, your layaway will be canceled. The item will be returned to the store’s shelves and you may have to pay a cancellation fee. Again, the amount of that fee depends on the store’s policy.

Layaway is credit-neutral. No companies I could find report layaway plans to the major credit bureaus. As a result, it doesn’t help or hurt your credit scores.

In one sense, that can be good. It won’t be listed as a “debt” on your credit reports, so you don’t have to worry about the amount you still owe on the item affecting that factor when your credit scores are calculated.

In another sense, it’s not so good. Consumers who are finding it difficult to establish credit could potentially benefit from having these plans appear on their credit reports.

There are some efforts to include layaway in what’s called “non-traditional” credit data; information that normally doesn’t show up on credit reports compiled by Equifax, Experian and TransUnion. But so far, those efforts don’t have much of a direct impact on consumers, so you shouldn’t count on building credit with layaway.

That’s too bad. If stores did report layaway payments, it would be a relatively risk-free way to help their customers build credit. After all, the store wouldn’t have to worry about consumers running off with items they hadn’t paid for, because a buyer doesn’t take possession until an item is fully paid for. In fact, this could be a case where no negative reporting is required: Consumers payments on layaway are reported, and if they cancel the balance on the “account,” it returns to zero!

However, until layaway plans are routinely shared with credit reporting agencies, you’ll have to continue to look at layaway as a budgeting tool. Weigh the costs against the benefits to decide if it is right for you.

And if you need to build or rebuild credit, consider a secured credit card instead.

Major retailers' layaway terms


  • Down payment: $15 or 10%, whichever is greater for an 8-week contract; or $30 or 10%, whichever is greater for a 12-week contract. No minimum purchase required.
  • Payments required: 4 payments for 8-week contract, 6 payments for 12 weeks
  • Set-up fee: $5 for 8-week plans, $10 on 12 weeks; waived through Nov. 23, 2013
  • Cancellation fee: $10 for 8 weeks; $20 for 12 weeks
  • Notes: 7-day grace period after payment is due or canceled


  • Down payment: $10 or 10%, whichever is greater
  • Payments required: N/A - see store
  • Set-up fee: None
  • Cancellation fee: $10
  • Notes:  Items must be paid for and picked up by Dec. 13.


  • Down payment: $20 or 20%, whichever is greater for 8-week plan; $35 or 20%, whichever is greater for 12-week plan. No minimum purchase required.
  • Payments required: Every two weeks
  • Set-up fee: $5 for 8-week layaway contracts, $10 for a 12-week layaway contract; waived Oct. 25 - Nov. 25, 2013.
  • Cancellation fee: $15 for new layaway contracts
  • Notes: 7-day grace period after payment is due or layaway is canceled


  • Down payment: 10% of total cost
  • Payments required: Payments must be made bimonthly, total of 90 days to pay off.
  • Set-up fee: $5 service fee, waived during free layaway promotion
  • Cancellation fee: $10
  • Notes: Holiday layaway items must be paid for and picked up by Dec. 15.

TJ Maxx

  • Down payment: $10 or 10%, whichever is greater
  • Payments required: Up to 30 days
  • Set-up fee: $5 non-refundable create fee
  • Cancellation fee: $5


  • Down payment: $10 or 10%, whichever is greater
  • Payments required: Up to 30 days
  • Set-up fee: $5 non-refundable create fee
  • Cancellation fee: $5

Terms as published on retailer’s websites as of Oct. 15. Keep in mind that in your state, certain terms and fees may be different due to state law. Be sure to read the in-store disclosure provided for current terms that apply.

More from

Oct 21, 2013 12:06PM
If you can't make the lay-away payments, you get a refund for what you have paid- minus a small service fee, and the lay-away is cancelled. Why would this effect your credit? They do not ask for your SSN!
Oct 26, 2013 10:59AM
Good Freaking Grief!  I don't have credit problems, but choose to pay everything in cash.  I use layaway at Christmas time.  It doesn't mean I am irresponsible, have bad credit, or been refused credit.  I just prefer using cash over running up a credit card and paying the credit card company more money.  That's a real problem these days.....people living off credit cards and the credit card companies laughing at the public while playing with the billions of dollars they have made off people.  Layaway is actually a smarter way to go than using credit!
Oct 26, 2013 8:35AM
Gerri consumers do not need one more way to have our privacy invaded by credit reporting agencies.  Leave layaway alone.  It works for people that need structure in their budget and have already been denied or disqualified for credit due to insufficient income or irresponsible prior behavior with past credit allowances. Layaway is a good option that serves the consumer and the merchant well and does not leave either party with a crushing debt that will never be paid off. 
Oct 26, 2013 7:53AM
They're always trying to find some way to intrude in your life but yet if something goes wrong, they want to hold you hostage for 7 years.  Back the hell off!!
Oct 26, 2013 6:57PM
Layaway should have no affect on your credit because you don't have full possession of the merchandise until it is paid off. Layaway is idiot proof.
Oct 26, 2013 1:54PM
when I retired I paid all my credit cards and use only debit card, or cash, lay a way has always been a lifesaver to single mothers trying to make a good Christmas for their families, why report this.  by the time you rack up credit card interest you are paying a hell of lot more than your lay a way fee, also, you have a place to store out of prying eyes until you need it.  people put things on lay a way for a variety of reasons, I have because something went on sale and I wanted it for my daughter; but she is a snoop, her birthday was a month away, put in on lay a way, so she couldn't find it.  the gift was rather large.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.