The short and sweet answer to this question is yes, you should still be able to take out a mobile phone contract with a poor or thin credit history. However, you may find it more difficult to do so, as some mobile providers may see you as high risk.
How do mobile phone contracts work?
A mobile phone contract is classed as a form of credit because you’re spreading the cost of the handset over a fixed period – instead of buying it outright. You normally need to make a small one-off payment to contribute towards the cost at the start of your contract. But most of the cost will be spread out over several months (typically 18-36 months). So, you’re essentially buying the phone on credit and paying the network provider back in instalments.
Do they do credit checks for mobile phone contracts?
Yes, because a phone contract is classed as a form of borrowing, most network providers will run a hard search on your credit report when you apply. They do this to see how creditworthy you are.
Providers will use your credit history to predict your future behaviour. If you’ve got missed payments showing on your credit report it could raise alarm bells.
If you’ve never taken out credit before, you may find it difficult to get approved for a mobile contract. This is because network providers will have no evidence to show whether you’re a reliable borrower. So, they may suggest that you start off with a pay-as-you-go deal instead.
Don’t make the mistake of applying for lots of 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.
Plus, any mobile phone contract applications can cause a temporary dip in your credit score. So, it’s best to space applications out to limit the damage.
Will a mobile phone contract improve my credit rating?
Yes, having a mobile phone contact can improve your credit rating if you always pay on time and don’t miss any payments. However, missing a single payment could knock around 130 points off your credit score.
What credit score is needed for a mobile phone contract?
Each network provider will use their own criteria, so there isn’t a minimum credit score that you should aim for, as such. However, the higher your credit score is, the better your chance of being approved for the phone contract of your choice.
What should I do if I’m rejected for a mobile contract?
1. Consider an older or cheaper handset
If you’re rejected for the mobile phone contract you had your eye on, all hope is not lost - there are still options available. You could consider getting an older model that isn’t as pricey, for example. This should reduce the risk involved for the network provider, which might mean they’re more likely to accept your application.
2. Research specialist phone companies
Also, there are companies out there who specialise in phone contracts specifically for people with bad credit. You can find them online or by speaking to a sales advisor in a mobile phone store.
3. Add someone to your contract
There are two options where someone with a good credit rating can help you get a good mobile deal:
Family deals are where two (or more) people can be connected to a single contract. As only one person (the main payer) is responsible for paying, only they will need a credit check.
The benefit of family deals is that it can work out cheaper if you split the overall bill between each person on the contract. However, only one person will be liable for all the bills, so they need to be aware of the risk to their own financial health if others don’t pay.
Get a co-signer
If you get a co-signer, they will be liable for your mobile payments. If they have a good credit score, this will offset the risk for the network provider. However, it has no positive impact on your credit rating. Plus, the other party needs to be aware of the risks to their own financial health and affordability before they agree.
4. Consider SIM only and pay-as-you-go deals
Providing you have an old handset you can use you could consider a SIM only deal. As with older handsets, only taking out the SIM means less financial risk and could increase your odds of getting a mobile phone.
There are also pay-as-you-go packages. Credit checks aren’t needed for these kinds of deals, meaning your poor credit history can’t hold you back.
Do you really need the contract right now?
If your mobile phone contract requests are being rejected because of a poor or thin 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 you’re sure you can afford it, and you absolutely need it.
There are a few things that can lead to a poor credit history, including (but not limited to):
Negative markers like defaults and County Court Judgements (CCJs) against your name
If it can wait, putting your phone contract on the back burner and working on improving your credit history in the interim might be the more sensible option. If you’re after inspiration, here are some top tips to help you improve your credit score in as little as 30 days.
Disclaimer: All information and links are correct at the time of publishing.