Most people don’t think about their credit profiles when looking to buy a new smartphone, but for those with low credit ratings finding a contract for a new iPhone can be a tricky prospect.
As smartphones have become ever more expensive with each generation, it has become increasingly important for phone companies like EE, O2, Three, and Vodafone to check their customers have the ability to pay the £40+ per month contracts they are signing up for. We may not think of smartphone contracts as a form of borrowing, but that is exactly what they are – mobile networks offer to loan you an expensive device in return for you committing to a monthly repayment schedule for the next two years.
In order to determine whether a potential subscriber has the means to pay off a loan, mobile networks perform a credit check before confirming the contract. If you have failed to meet your monthly payments on a credit card, loan, or previous phone contract then this will impact your score and may preclude you from being able to sign up for a new mobile contract and getting that shiny new iPhone. Worse, if you have recently been refused a new contract already, this is also reflected in your credit score and might make the situation even more difficult.
To avoid a surprise it is recommended to regularly check your credit score with the three UK credit reference agencies, Equifax, Experian and TransUnion (formerly Callcredit). A number of bank accounts, credit cards, and other financial apps will let you check your score for free and keeping on top of this information will help you keep in good financial health in a broader sense too.
Nonetheless, for those that already have a few dings against their name in their credit score, or who have little credit information available such as young people and those moving to the UK from abroad, all is not lost. If you have the funds to buy a new phone yourself, or pick up a lightly used second-hand device for a significant discount, then you will still likely be able to get a monthly SIM-only deal with no credit check done. Such deals can also save you money in the long-term, with competition between Sim-only providers particularly fierce at the moment with the growth of new MVNO networks like GiffGaff, Smarty, and Tesco Mobile. You may need to pay hundreds of pounds for your phone, but your monthly outlay could be under £10 for unlimited calls, texts, and gigabytes of data.
Regardless of whether your new contract required a credit check, it is important to be aware that missing a monthly payment, even if it is just for £10, can impact your credit score in the future. Make sure to only sign up for a contract that you can afford, and don’t forget to update your network when your move house, your bank sends you a new debit card, or your circumstances otherwise change.