Most networks require a credit check before they will sell you a mobile phone contract; particularly if it comes with a premium smartphone. This can be a barrier if you have a poor credit score, either because you have a bad credit history or just no credit history.
SIM-only is an easy way to build up your credit rating and improve your chances of being accepted for a phone contract in the future. Our guide tells you all you need to know about mobile credit checks and what to do if you are turned down for a mobile phone contract.
What is a credit check?
Credit checks are reviews of your financial history and are carried out anytime you apply for credit such as loans, credit cards, mortgages and mobile phone contracts.
Your likelihood of being accepted for credit can be affected by a number of things including high levels of debt, missing or late payments, not being on the electoral register and even by never having had credit. The checks are used to assess whether you are able to make the repayments on your contract and to prevent fraud by checking you are who you say you are.
An individual credit check is unlikely to ruin your credit rating or risk your financial status, but applying for lots of products or services that require credit checks can have a cumulative impact.
Which networks use credit checks?
All of the big four mobile network operators and most of the smaller virtual network operators use credit checks to verify your suitability for a mobile contract.
Pay As you go contracts rarely need credit checks, and can be a good way on to a network.
What happens if my credit application is rejected?
If you have been refused don’t worry, there are plenty of ways to get a mobile contract as well as things you can do to improve your poor credit score.
Double check your details
Sometimes credit checks fail because the network is unable to identify you, rather than because of your credit history.
Check the address you have provided is correct and if you have an address that isn’t quite standard – for example a house name rather than a number, or your property was recently built, try it in a slightly different format.
Re-apply with a different provider
The good news is each company considers applications against their own criteria so if you’ve been turned by one it doesn’t mean you’ll be turned down by them all. Re-apply with a different mobile network but try and stagger your applications, requests for credit stay on your credit score and multiple requests can negatively affect your credit rating making it less likely that you’ll be accepted.
Go for a SIM-only or Pay As You Go deal
You are more likely to be turned down for a contract with a phone than a SIM-only contract if you have a bad credit score. This is because of the additional value of the handset, the higher monthly repayments and the longer terms that come with a contract with a phone. SIM-only is a good way to build up your credit score as you make regular monthly payments and it also allows the network to get to know you as a customer, increasing your chances of being accepted for a deal with a phone in the future.
Pay As You Go contracts are flexible and you don’t need to pass any checks. However they are more expensive and don’t help to build your credit score in the same way as SIM-only as you pay up front for the services you use rather than being billed each month. Giffgaff also operate this way so if you want a SIM-only deal to help build up your credit score make sure you go for a rolling 30-day deal or a 12 month contract to see the benefits.
What if I really need a phone contract?
If you want a phone with your contract then go for giffgaff. The network supplies phones using financing through RateSetter, a peer-to-peer loan company. Instead of full credit checks RateSetter use soft credit checks that don’t investigate your financial history as deeply and more importantly don’t leave the same marks against your credit file. This means that even if you are turned down it won’t have an adverse effect on any future credit applications.
For more tips on improving your credit score visit the Money Advice service.