Mobile Phones and Credit Scores: A Complete Guide

Close up of man holding iphone in his hand

Improving your credit score can often seem like an uphill battle. It doesn’t take long for your score to fall if you’ve gone through a rough patch of missing payments or being rejected for credit, but building it back up takes some time, research and patience.

There is, however, a simple way to start improving your credit score with something you use everyday - your mobile phone. If you’re currently a Pay-As-You-Go mobile customer, it may be worth considering entering into a contract with your provider to start building up your credit.

In this guide, we explain whether or not mobile phone providers do a credit check before giving you a phone and how a mobile contract can help boost your rating.

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Will my mobile provider do a credit check?

Yes. A mobile phone contract is essentially a credit agreement because you’re getting the phone now and paying for it later on a monthly basis, so most mobile providers will do a credit check with a credit reference agency (or multiple agencies) during the order process when considering whether or not to accept your application for a phone contract - whether that’s a 24-month contract or a longer-term SIM-only deal.

Some providers will carry out soft searches to check some basic information about you, which won’t harm your score, but it’s likely that some will conduct a hard search to take a more extensive look at your financial history, which will show up on your credit report. The decision is often instant, in most cases.

Remember, multiple applications for credit over a short period of time may harm your credit score, so make sure you only apply for the deal you definitely want, keep applications to a minimum and make sure you’ve checked your credit score first to find out how eligible you are for credit.

Learn more: A complete Guide to Credit Scores in the UK

Mobile phones for bad credit

Some mobile providers are easier to enter into a contract with than others. Currently, Three UK and Vodafone are reportedly more likely to offer a contract easily, so if your credit score is poor, it may be best to apply with them first.

People who have low credit scores won’t necessarily be rejected when applying for a mobile phone contract, but they may face higher costs or other penalties as a result, such as higher up-front costs and limited monthly usage.

It is also worth noting that more expensive phones and newer models are likely to require a good credit rating, so you may want to consider getting a cheaper handset if you have a bad credit score.

Read more: Creditworthiness: What do Lenders Look at?

What credit score do I need to get a mobile contract?

According to industry experts, there is no minimum credit score that you are expected to have for a phone contract. Each network operator will have different criteria and may view your score and financial history differently to other mobile companies.

As the amount of credit you will be applying for is quite small compared to taking out a loan or mortgage, it’s generally relatively easy to get a mobile phone contract, even if you do have adverse credit.

The other advantage is that these mobile providers need to pull customers into a contract so that they are guaranteed an income, and with many contracts starting at a minimum of 18 months or two years, they could be missing out on a good source of income by failing to offer customers a mobile phone contract if they don’t have a good score.

I’ve recently moved to the UK - Does my credit score come with me?

Unfortunately not. You may have crossed the border, but your credit score stays where it is. Even though you’ll essentially be starting from scratch, there are a few ways in which you can start building your credit score quickly. If you have an overseas credit report, then this may work in your favour, but it may still be a good idea to add yourself to the Electoral Roll as soon as possible.

You can also build a credit card with a mobile phone contract and a credit builder credit card, so you’ll want to look into these straight away if you want to get access to the best credit deals in the future.

Whenever you look into any type of agreement, check each provider’s small print to see how likely it is that you’ll be accepted first, rather than applying for multiple credit accounts and potentially getting rejected (which will further damage your credit rating) - particularly if your credit score is low already.

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Which phone and tariff should I choose?

Building your credit score with a mobile phone contract works in just the same way as if you were paying for your car on finance. The first thing to do is sign up to a contract that you know you’ll be able to afford. Don’t fall for all the offered extras such as unlimited data if you’re not going to be able to keep up with the payments. Keep it simple and only sign up for what you are likely to use.

With a mobile phone contract, you’ll be taking out credit on the handset as well as the monthly tariff. Don’t go for the latest tech if you know it’s going to be out of your price range; many smartphones only change slightly with each upgrade so it’s likely you’ll be able to do what you need with one that’s a few years older (and cheaper). Refurbished phones will still work perfectly well too, so don’t be put off by a pre-owned handset.

Simply choose the phone tariff you will be comfortable with paying on a monthly basis. You can search many different tariffs in the same way that you can for your gas and electric; shop around and you’ll be able to find a great deal.

How does my credit score improve with a mobile phone contract?

It’s the same as any other bill you receive; make sure it’s paid in full and on time. Any missed payments will reflect badly on you as a customer and will make your credit score go down quickly, making it harder for you to find credit elsewhere in the future.

The easiest way to pay your mobile phone contract is via Direct Debit; that way, you won’t have to worry about forgetting to pay - the amount due will be taken from your bank account automatically, and the most important thing is to make sure the money will be in the account when it’s due to be taken. When you’re setting up your contract, choose a payment date when there is likely to be enough in your account to cover it - just after payday for instance.

As with most of your bills, prompt payment in full and on time can seriously improve your credit score. If you’re building it up after a tough time or starting from scratch after moving to the UK, getting credit from a mobile phone contract is one of the easiest ways to get your score heading in the right direction.

To see your score now, head over to Checkmyfile, a multi-agency credit reporting website that uses all four UK credit reference agencies to give you a full, detailed report.

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