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Monday Myth-Buster: Does missing a phone bill affect my credit history?
Many people have a mobile phone contract these days. When the handsets themselves cost hundreds of pounds, and you have to pay to use the network on top of that, paying monthly makes things a bit easier to budget for.
However, you might be surprised to hear that missing a payment or falling behind on your phone bill can actually damage your credit history.
Keeping on top of your credit
When you take out a mobile phone contract, you’re actually entering into a credit agreement. You agree to pay monthly for a certain amount of time – usually one or two years – to buy the handset and use a mobile phone network.
As it’s a credit agreement, you’ll also be charged interest. That’s why the total cost of your contract is usually much more than if you just bought your phone outright and got a pay-as-you-go SIM card.
This is also why a missed bill payment will appear on your credit history – much like it will if you miss a payment on a credit card, loan or mortgage.
Missing a payment to your mobile phone provider can actually work against you in the future. If you have a limited history of managing credit, you may find that just one missed mobile phone payment means future lenders turn your application down.
If you miss several payments, or fall into arrears with your mobile phone provider, they may even take out a County Court Judgement against you. They should send you advance notice that they are taking court action, and they’ll only ever issue you a CCJ if you don’t respond to them when they contact you.
It’s important not to let things ever get to this stage, as a CCJ can stay on your credit history for up to six years. If you start to fall behind with your payments, speak to your mobile phone provider and see if you can come to an arrangement.
Be prepared for a credit check
When you apply for a mobile phone contract, the provider will credit check you. This is because they want to see your history of managing payments, and clear any worries that you’ll struggle to keep up with your mobile phone bill.
Because a mobile phone contract is a kind of borrowing, you may find it tough to get a contract if you have a poor credit history. This can also be a problem if you don’t have any history of borrowing at all, as phone providers don’t have any information to base their decision on. If this is the case for you, they might turn down your application or ask you to pay a deposit.
So, while you may not have realised it before, a mobile phone contract is a credit agreement much like a credit card or a loan contract. It’s vital to weigh up whether you really need a contract before you apply, as saving for a handset and getting a pay-as-you-go SIM card often works out to be far cheaper.