From the credit check and missed payments to rejections and alternative options, we’ve taken a 360 look at taking out a mobile phone contract with poor credit.
The short and sweet answer to this question is yes.
Having a poor credit history doesn’t mean you’re not eligible to take out a mobile phone contract full stop. What it does mean, however, as with any other type of credit (like a loan, credit card or overdraft, for example), is that you may be less likely to be given the contract in the first place.
The credit check
Taking out a mobile phone contract is essentially a type of credit. You’re getting the handset itself and the minutes, texts and data (or whatever the package entails) now, and paying for it at a later date.
Because of this, and fairly so, most network providers will run a credit check before they offer you a contract to assess two key elements:
1) Whether or not you can afford the monthly payments for your contract, to ensure they recoup everything they’re owed.
2) How you’ve managed money in the past. No network provider wants to soak up resources chasing customers for money, so if you’ve got a track record of missed or late payments, this could raise alarm bells.
If the mobile phone contract you’re after is the first type of credit you’ve taken out, you may find your non-existent credit history could hold you back too. This is because network providers will have no information to go off to suggest you are or aren’t a responsible borrower.
Rejected, what now?
If you’re rejected for the mobile phone contract you had your eye on, all hope’s not lost. Your first back-up option might be to apply for a contract for an older model of the same or different handset. Because earlier versions aren’t as pricey, there’s less risk involved for the network provider, which might mean they’re more likely to accept your application.
If you’re still faced with a no, there are companies out there who specialise in phone contracts specifically for people with bad credit. However, if you’re considering this option, bear in mind the phone’s usually older and your monthly payments will probably be significantly higher.
Alternatively, providing you have an old handset you can make use of (or can buy or borrow one), another option could be to look into a SIM-only contract. As with older handsets, only taking out the SIM means less financial risk and could increase your odds of being accepted.
The fourth and final option could be to look into pay-as-you-go packages. Credit checks aren’t needed full stop for these kind of deals, meaning your poor credit history can’t hold you back.
Don’t make the mistake of applying for lots of mobile phone contracts if you’re not accepted right away. As with any type of credit application, each will appear on your credit report and a string of requests can make you look desperate to future network providers - and lenders in general, for that matter.
As a result, you’ll be shooting yourself in the foot. Essentially, the more applications you make, the less likely network providers are to say ‘yes’.
Do you really need the contract right now?
If your mobile phone contract requests are being rejected because of a poor credit history, the first question to ask yourself is, do you really need it? Taking on any type of credit is a big financial commitment, and one that should only be considered if a) you’re 100% confident you can afford it, and b) you absolutely need it.
There are a number of things that can lead to a poor credit history, like:
By taking out a mobile phone contract, you’re agreeing to make monthly payments to the network provider in question to repay what you owe. If, for whatever reason, you make a late payment or miss one altogether, it can leave a mark on your credit history for six years. This’ll:
a) Harm your credit history further
b) Be visible for all future lenders to see
c) Make it more difficult to be accepted for any type of credit in the future.