When we take out a credit card, home loan or personal loan, we understand that not making our repayments can damage our credit score.
But can phone plans impact our credit report?
While Telstra, Optus and Vodafone may all perform a credit check when you apply for a mobile plan, this won't normally affect your credit score.
However, if you miss a bill payment, this can be listed on your report as a default and can hurt your score.
There are 2 key ways a phone plan can impact your credit score:
When you apply for a postpaid mobile plan, the provider may perform a credit check to assess your suitability for the plan. This check may appear on your credit report, but shouldn't affect your credit score unless you've applied for multiple plans in a short period of time.
Different telcos will have their own approach to checking your credit when you apply for a phone plan. If you have a good credit score, it's unlikely you'll have any issues getting approved for a phone plan.
However, if you have a bad score, or too many red flags on your credit report, your application might be turned down.
Here's when the major mobile providers will perform a credit check:
If you're looking to get a new mobile plan but don't want to have your credit checked when you apply, your best bet is getting a prepaid plan. Prepaid phone plans won't require a credit check, and many now offer data and pricing that is competitive with postpaid plans.
You could also consider plans that are paid for in advance, such as Telstra's Upfront plans. Like prepaid plans, these will generally not require a credit check.
Unfortunately, simply paying off your phone bill on time each month will not normally be recorded on your credit file, and therefore won't have any positive impact on your score. Credit reporting agencies only receive payment history from licensed credit providers like banks and credit card providers, but not phone or internet providers.
But while things like your phone or utility bill aren't normally recorded on your credit file, they can still negatively impact your credit score if you have "defaulted" on a payment.
If you have a late phone payment of at least $150 that is overdue by more than 60 days, it will be considered a default. At this point, your phone provider will report this to the credit reporting agencies, which means your credit score may fall. The default will also remain on your credit file for 5 years.
If you miss a payment, you should first try to pay off the bill as soon as possible. If you're in financial difficulty and unable to do so, you should contact your phone provider immediately to explain your situation and discuss your options.
Before your late bill is considered a default, your phone provider should first have attempted to retrieve the money, and then separately inform you that your late bill will be reported as a default to the credit reporting agencies.
As well as hurting your credit score, defaulting on your phone bill may also make it harder to get another mobile plan in future.
The easiest way to avoid defaulting is simply paying your bill on time, ideally using direct debit. As mentioned above, if you do miss a payment, make sure to pay it off as soon as possible and contact your provider if you are unable to pay.
Alternatively, you could take out a prepaid mobile plan that you pay for upfront.
Follow these tips to get a handle on your credit with this free tool.
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