A bad credit score can be really restrictive when it comes to getting access to the more luxurious items in life. However, it can also be a bit of a hinderance when it comes to the necessities as well, such as mobile phones. When you apply for a mobile phone contract, what many people don’t realise is that you are in fact applying for some kind of credit.
The same credit checks are run as they would if you were applying for a credit card or loan. This means that the same factors effect your approval onto the contract. So what are your options in terms of mobile phones when you suffer from a poor credit rating?
Throughout this article we look at some of the most frequently asked questions regarding mobiles and bad credit ratings. As well as highlighting some of the plans that may be on offer to you and finally discuss the pros and cons of monthly plans with bad credit.
To answer the above question in one word, the word would be yes. Just because you have a poor credit rating now, doesn’t completely restrict you to pay as you go mobile phone plans. You can still get approved for a pay monthly plan, it’s just a little harder to do so. Before heading out the door to hassle mobile phone providers, it’s worth following some simple steps to improving to your credit score.
These can be found in detail in another of our informational articles on this site. As a quick refresh, check through your credit file for any open credit accounts and close them, make sure you have consistency of information across your applications and make sure no one already has a contract open in your name.
Once you’ve checked through your credit history it’s then time to look for a plan. Unless you go to a specialist retailer that we have given you hints for below, then specific plans for bad credit are pretty hard to come by. What you may want to look at is buying your handset and then taking out a SIM only plan, as they are much less of a risk in the eyes of the network providers than giving you a brand new top of the range handset.
If you’re looking to land yourself an iPhone 5S or Samsung S4 with poor credit, then you may want to reassess the situation. Having poor credit is restricting! So going for a SIM only plan or being able to pay a substantial deposit are going to be your best routes of getting a mobile phone contract with bad credit.
There are a number of places that you can get bad credit mobile phone contracts today, ranging from specialist online stores to high street retailers. It’s worth noticing that high street retailers prices are fixed on the high street, and if you have poor credit you may have better luck getting a contract if you call and speak to a customer service agent directly. With this aside, here are our suggestions:
1. Bad Credit Mobiles (Online Store) - Bad Credit Mobiles are an online store that offer handsets from Apple, Samsung, Sony, HTC and Blackberry on a number of pay monthly plans. Boasting a 100% Guaranteed Approval rate, they could be your go to option if you’re after a top of the range handset.
2. Skyline Mobiles (Online Store) - Similar to Bad Credit Mobiles, this online company offers you access to the latest handsets regardless of you credit rating. They will charge you for the privilege, so the bills may be a lot less manageable than other providers, but they also guarantee approval within 5 minutes of applying.
3. EE (High Street) - EE seem to be the most flexible when it comes to getting a contract with poor credit. Where they are unlikely to be able to offer you an expensive top of the range handset plan, they have a great range of SIM only offers that are perfect for those with poor credit.
4. Three (High Street) - Similar to EE, 3 are incredibly flexible with contracts for poor credit. They have a superb diverse number of SIM only deals that give great value at small expenditures. They currently have one of the cheapest SIM only deals in the UK at just £15 a month for the ‘One Plan’.
There are a number of alternatives when it comes to mobile phones if you are rejected from the plan that you want at a high street retailer. The first thing for you to consider are SIM only plans. These do not have the ‘free’ phone included, so they involve you buying a handset or using the one that you own already. Because they don’t come with a phone they are significantly less risky for the provided to give you, meaning your chances of approval are already higher.
Secondly, a lot of providers now offer you the option of paying a deposit on your contract. The cost of this deposit is dependent on your credit score and the cost of the monthly plan you are after. When I had poor credit, I took an iPhone out with O2, on a £30 per month plan and was asked to pay a £150 deposit.
You pay the first 3 months of you bill as normal, then once you’ve proved that you can make the repayments, you bills begin to get deducted from the prepaid deposit.
SIM Only deals are a godsend for those with poor credit. They enable you to attain a contract pay monthly plan much easier, because you are only paying for use of the supplier’s network. The main problem that leads to rejection from pay monthly schemes is that the network are giving you a phone at ‘no cost’.
Well there is a cost for the handset, but the network pay this back to the retailer from your monthly bill, which is effectively credit. With no handset, there is less credit, so provided you can afford to pay the bill there should be no issues in obtaining a SIM only deal. SIM only plans are also much more affordable, as they are without the inflammatory cost of the handset from the network, which always works out more expensive than buying it outright.
Because of their affordability, they are ideal for those of us with poor credit as they have more than manageable bills, usually around £15 - £20 a month. Compare this with the £45 a month you’ll pay for a contract with a top end smartphone and you’ve more than doubled your expenditure.
Keeping costs low means less chance of missed payments, which can only be positive for your credit score.
Many network providers offer flexible ways to pay your monthly bill now. From calling up, to paying online, they’ve managed to give you as many options as possible to pay your bills on time to avoid late fees. Perhaps the simplest way to avoid those harmful late fees is to pay by direct debit, this rules out the possibility of you forgetting to pay your bills which can be really harmful to your already low credit score. As well as direct debits, you have the option to pay with debit or credit card, although paying for credit with credit is not something that I would recommend as it effectively compounds the interest that you are paying.
The major benefit of having a monthly plan over a pay as you go plan, is the boosting potential that it has for your credit score. It has the potential to demonstrate to bigger lenders that you can handle monthly payments and manage your money in a sustainable and timely manner. Getting awarded a mobile phone contract is many peoples first step on the road to the recovery of their credit score.
Just make sure you manage it correctly. As ever though, credit is a double ended sword. If you take out a contract and then can’t afford to make the monthly payments, all of that is recorded on your credit file, making it harder to secure borrowing in the future. As well as that, you’re mobile phone will get cut off which isn’t ideal for anyone in today’s society.