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A phone contract is a type of credit, just like a personal loan, credit card or mortgage. While most people have no problems getting a phone on contract, some people struggle because of a bad credit rating. Read on to find out what credit score you need for a phone contract and how you can boost your chances of getting accepted.
Whenever you apply for a type of credit, the lender will carry out a credit check to determine how well you manage debt. This credit check will bring up numerous pieces of information including your credit score, existing debts, past debts, missed payments and more.
Your credit score is only one piece of the puzzle and there is no set credit score that you need for a phone contract. The higher your rating, the better your chances of getting the contract you want, but a lower score doesn’t automatically rule you out.
You don’t just have one credit score. You have at least three. This is because there are three main credit reference agencies in the UK. They include Experian, Equifax and TransUnion.
Each agency holds their own credit report in your name and has a detailed file outlining your financial behaviour past and present.
This information is then used by lenders when they’re deciding whether they want to lend to you or not.
Having a good credit score certainly boosts your chances of getting a phone contract and other types of credit, but it’s still possible to get a contract with an average or low score.
This is because your score doesn’t paint the full picture. Lenders tend to look at your credit report as a whole, rather than focusing on these numbers.
Most people with a bad credit history are still able to get a phone contract, but there have been cases where people have been rejected.
If you’ve struggled with debt in the past and you’re concerned about your ability to get a phone contract with your credit score, here are a few options:
If you have bad credit, getting a contract for the latest iPhone might be a challenge. You could compromise by choosing a cheaper handset for now and upgrading in future when your credit is better. However, some people still struggle, so this isn’t a guaranteed solution.
A SIM-only deal could be another option. Lenders might be reluctant to lend you enough to buy a phone, but they may agree to a SIM-only deal instead.
This is still a type of contract and it’ll allow you to gradually build up your credit rating too.
Handsets can be bought cheaply if you’re happy with a second hand or refurbished phone. Even buying a model that’s just a couple of years old can be surprisingly affordable.
With so many people getting a new phone every couple of years, many people end up with perfectly good devices that they no longer use. So it’s worth asking friends and family if they have an old handset you could borrow.
If your credit is really bad, it might be necessary to get a phone on pay-as-you-go instead of applying for a contract or SIM-only deal. You won’t need to have any credit checks for this type of deal, so your credit history won’t matter.
If you follow the credit score tips below, hopefully you’ll get to a stage where you can upgrade to a full contract with a handset included.
There are lots of things you can do to make yourself look more attractive to lenders in future. It can take time to build your credit for a phone contract, but with some patience, you’ll find it easier to borrow money over time.
Paying your existing debts on time and in full is one of the most straightforward yet effective ways of boosting your credit score. If you sometimes forget to make your payments, set up a direct debit so it’s taken care of, whether you remember or not.
Registering to vote might seem irrelevant to your borrowing habits, but being on the electoral roll can have a positive impact on your credit score. Lenders need to be able to confirm your identity and if they can’t find you on the electoral register, this can be difficult. Even if you don’t have any intention of voting in the next election, it’s a good idea to register anyway.
There are two types of credit check. The first is known as a ‘soft’ check or search, which looks at specific details on your credit report.
For example, a loan provider, a credit card firm, or an insurance company may conduct a soft search to see how successful you’d be if you applied for one of their products. It’s worth noting that lenders can’t see soft searches either, which means your credit rating or future applications won’t be negatively affected.
The second type of credit check is a ‘hard’ search. Hard searches are carried out when you apply for a line of credit. These can be seen by other lenders.
If your credit report shows multiple hard checks during a short period of time, this can negatively impact your score and make it harder to borrow. It’s a vicious spiral where one rejection can lead to another.
If you’re ever rejected for a type of credit, it’s a good idea to wait a few months before applying again.
If you have any unused credit or store cards, it might be worth cancelling them if possible. Having several lines of credit available to you can make lenders reluctant to approve new lines of credit.
Some lenders worry that borrowers will go on a spending spree and won’t be able to pay them back.
There is an exception to this, however. According to a Money Saving Expert, if you have any lines of credit that you’ve had for a long time and have managed sensibly, it might be worth keeping them open.
For example, if you have a credit card that you haven’t used in a few months but you’ve never missed a payment on it, getting into the habit of using it again could help you improve your score. As long as you don’t miss any payments, of course.
If you ever had a joint bank account, joint loan or joint mortgage with an ex-partner, check your credit report and make sure you’re no longer financially connected to one another.
If you find you’re still connected, you can contact the credit referencing agencies and ask for a notice of disassociation. This will update your credit history so that their finances can no longer affect your credit rating.
Whether you have access to £5,000 or £10,000, it can be tempting to spend it all and worry about paying it back later. But this approach can harm your score and scare lenders away. It’s a good idea to keep a credit utilisation rate of around 30% or less. This means if you have a limit for £5,000, you only use around £1,500 of it.
By using far less credit than you have available, you can show your finances are under control. When it comes to boosting your credit score, good money management and a sensible approach to debt is what it all boils down to.
