Many people believe they need a stellar credit score to secure a SIM-only contract. But while credit checks are usually undertaken for these types of contract, the requirements are a lot more relaxed. Even if you’ve been rejected for a traditional contract in the past, you may well be accepted for a SIM-only deal. Here we explain why that is.
What is a credit check?
A credit check is a review of your entire financial history. It looks at past and current credit, how much debt you have and whether or not you pay bills on time and in full. Credit checks may also take into account financial associations, such as anyone you have shared bank accounts or a mortgage with. Credit checks are used to assess how likely you are to pay back what you intend to borrow, mitigating risk for the lender. They are carried out whenever you apply for credit; including loans, overdrafts, store cards, mortgages, mobile phone contracts and more. Utility suppliers, landlords and letting agencies, banks and employers may also check your credit report.
You can check your credit report yourself. There are four main credit reference agencies in the UK, and they may hold slightly different scores and information for you. You can check with all four individually, or you can use a third-party service that pulls in data from them all. The credit references to check with are; Crediva, Experian, Equifax and TransUnion. Checking your statutory report is free, though there is often a charge if you require more detailed information.
Which networks use credit checks?
All four of the UK’s network run credit checks if you’re applying for a mobile phone contract. That’s EE, O2, Vodafone and Three. The majority of retailers and virtual network operators, such as Sky, TalkTalk, Plusnet and Tesco Mobile will also perform credit checks in most scenarios.
Credit checks are never required for buying a handset outright with your own cash or for a Pay As You Go SIM card. In addition, credit checks are not conducted by companies that offer prepaid SIM-only deals, such as Smarty, GiffGaff and Voxi. More on that below!
SIM-only deals have more relaxed credit requirements
Credit requirements are not all the same. Requirements can vary wildly between companies and products. For example, some phone contracts require the applicant to have a great credit score, while others aren’t anywhere near as strict. It all comes down to risk. A really expensive iPhone bundled with 20GB of data and unlimited calls and texts is far higher risk than a basic SIM-only deal with no handset and a really short contract length. To better guarantee they get their money back, the network will only give the expensive iPhone bundle to someone with a stellar score. While the low-risk SIM-only deal is made available to those with much lower scores.
As a result, the acceptance rate for SIM-only deals is considered to be around 99%. This means that even if you’ve failed credit checks in the past, you’re quite likely to be accepted for a SIM-only deal.
In even better news, a SIM-only deal can actually help improve your credit score. Since it is a form of credit with a contract and payment schedule you’ll see your score go up, provided you make all payments on time of course. You’ll need to keep at this for a while to see the improvement but it’s really worth the patience.
SIM-only with no credit checks
If you have recently applied for a SIM-only deal and were rejected, all is not lost. A number of companies offer SIM-only deals that don’t require you to pass a credit check.
These deals include the same sort of allowance of minutes, texts and data but you pay upfront. It’s a bit like a Pay As You Go SIM deal, but generally much better value, and you don’t have to ‘top-up’ your phone. You pay monthly via direct debit and the contract is usually 30-days so you can cancel and switch at any time.
GiffGaff, Voxi, Smarty, ASDA Mobile and Lebara Mobile all offer no credit check SIM deals, with a great range of packages (and added benefits) to choose from. However, it is very important to note that this kind of deal will not help rebuild your score, because you are not taking out any credit.
In short, SIM-only deals are the best solution for those with a poor credit rating or no credit history because the credit requirements are so lenient. They’re great value and there’s something available for everyone, regardless of your past and present financial circumstances.