You can get turned down for credit or a mortgage for missing a mobile phone payment

There are around 74 million mobile phones in Britain and the owners of 26 million of them have signed up to a contract with one of the big network providers. But there's more to these agreements than you might expect.

Who'd have thought that entering into a mobile phone contract could seriously affect your credit score?

A missed mobile phone bill payment could come back to haunt those applying for a mortgage, loan or credit card and could mean you getting turned down. When the lender undertakes a credit check, any missed mobile phone payments will show up in your credit file and this could be enough for them to decline your application.

Most mobile phone companies have no hesitation in slapping a black mark on someone's credit file for even the most minor infraction.

A spokeswoman for Experian, one of the main credit reference agencies, says:"People often don't realise that a phone contract is just as important to keep up to date as a credit card. A missed mobile phone payment will have an effect on your ability to get credit in the future."

A report on the BBC's One Show covered the subject and featured an interview with Rachel Westbury who wasn't happy with her mobile network, but when she tried to leave her contract, she ended up in dispute with the company.

Rachel Westbury: "I owed a settling amount of my contract of £33.12 which I paid but they said I hadn't paid."

Little did she realise what a destructive effect that small contractual dispute would have on the rest of her finances. Out of the blue, Rachel was refused credit for the first time. Worried, she checked her credit file and found a glaring entry about that mobile phone contract.

Rachel Westbury: "They'd managed to tarnish my report and say that I was a bad payer. I've been refused a store card, I've been refused a credit card and I've currently been refused a mortgage because of this £33.”

What most of us don't realise is that when you take out a contract on a mobile phone you're taking out a credit agreement. Because the network provider gives you the calls up front and you agree to pay them back at the end of the month, those payments count towards your credit record.

The credit reference agency where Rachel checked her file was asked whether there was anything else on her record which could have made her a high risk borrower. They confirmed that the main reason Rachel now has a low credit score is because of the mobile phone situation. How does that make her feel?

Rachel Westbury: “I didn't think that an amount such as £33 for a mobile phone contract would have such an affect on my credit and mean that I can't get credit or I can't get a mortgage or store cards. I just find it baffling and I'm just appalled."

While Rachel attempts to get the phone company to acknowledge she wasn't a bad payer, she can ask the credit reference agency to put a note on her file explaining the situation. Once it's sorted out she could ask the credit agency to amend her file.

These days, lenders are getting very choosy and checking absolutely everything on your credit history before handing out cash. So if you want to keep your file clean and keep your mobile phone on contract, then the advice is to pay by direct debit: that way you shouldn't get caught out.

Checking your credit file

If you have been turned down for credit and you believe it is due to a problem with a mobile phone contract, the first thing you need to do is check your credit report.

Not all firms will turn you away

If your credit rating has been damaged, there are firms who may still be able to help. The majority of lenders use automated credit scoring systems and will often reject good quality applicants simply because of a minor issue in their credit file. Other lenders are less rigid and welcome applications from individuals with impaired credit scores, providing they can afford to make the repayments on any amount they borrow. If you're seeking a loan or credit card then a credit builder product may be suitable. Click through on one of the buttons featured in the right hand column of this page to view details of lenders and products which are aimed at individuals with flaws in the credit report. If you are looking to buy a home, a mortgage broker is best placed to be able to offer you impartial advice as to which lenders may help.


Financial products suitable for people with low credit scores