Bad credit? Avoid credit checks with prepaid cellphone plans
By Dawn Papandrea | Published: May 11, 2017
Looking to lease a shiny new smartphone? Shopping for an unlimited data plan for your family? If you have bad credit, it used to be you had few options to get the best plans and phones that didn't require a credit check. But that's all changing with major carriers offering prepaid cellphone plans.
But first, here's why your credit matters to cellular companies, along with a breakdown of prepaid plans designed for those who can't qualify for a regular "post-paid" account, or for those who would rather avoid a credit check entirely.
Why credit counts
The cellular industry has shifted in terms of how you get your device, says Kohposh Kuda, director of marketing for Sprint. "A few years ago, the device financing concept didn't exist; instead you got a subsidized price or a big discount on a phone for signing a two-year contract," he says.
What's changed is that today there is less focus on contracts and more flexibility for consumers who want to finance a device, mostly by adding a monthly leasing fee to their service plan to pay off a phone slowly.
"The companies need to know that the customers will pay their bills and not abscond with devices, which haven’t been paid for," says Jan Dawson, chief analyst at Jackdaw Research, a technology research and consulting firm.
While Dawson suspects that credit requirements have become stricter in the expensive smartphone era, the carriers themselves would not divulge the minimum credit score they are looking for when approving new customers. And, according to Kuda, credit requirements may be a sliding scale anyway, depending on the type of device(s) and services you're seeking. For instance, the threshold may be higher for a prospective account holder who wants four new iPhones versus someone looking to open a one-line older model Android account, he says.
Either way, Kuda points out that credit score isn't the only factor in play. "We use a set of variables to determine the best service option for a customer," says Kuda. A big one is if the customer had service with Sprint previously, and if that account was kept in good standing.
The reason you don't hear about deposits much anymore is that the four major carriers now offer robust prepaid cellphone plans, ideal for less creditworthy customers.
While the other carriers chose not to comment for this article, Dawson agrees that being with a cellular provider for a long time can help offset a lower credit score. "T-Mobile in particular has introduced some of these other measures of creditworthiness," he says.
Paying for a phone
If you don't have a device on hand, paying for one in cash because you don't qualify for leasing is no joke, especially if you want the latest iPhone or Samsung Galaxy, which puts pricing in the $700 range.
To keep costs more reasonable, you can purchase a less popular model through the carrier. For instance, Verizon is offering prepaid customers a Samsung Galaxy J3 (a 2016 model) for $99 as of publication time. Or you can get an older, 16GB Apple iPhone SE through T-Mobile for $384.
Another option is to navigate online marketplaces on your own since the carriers allow you to bring your own device. "Buying a smartphone secondhand would be the best option to save," says Dawson. But beware – if the device is reported lost or stolen, no carrier will allow you to use it. You want to be sure you're dealing with a reputable outlet. Gazelle is a safe bet for refurbished products, while Amazon and eBay offer some money-back guarantees for devices purchased from third-party sellers.
You also need to be mindful when buying used equipment that it might not be compatible with your choice of carrier.
Look over each carrier's specifications and "unlocking" process before you buy:
for post-paid service
At Sprint, Kuda says that credit checks are mostly for people who wish to finance a device. Therefore, if you're adamant that you want a traditional, post-paid account (where you are billed for the device and service every month), you still might be able to make it happen without a strong credit history if you pay for your device upfront (or want to bring one over that you already have).
"For post-paid accounts, we do run credit most of the time, particularly because the majority don't mind it. If they say no, they can still qualify for post-paid in some cases, once we determine how much service they are looking for and consider other factors," says Kuda.
For a while, carriers also offered customers the option to pay a deposit in lieu of a credit check, says Dawson, but they seem to be moving away from that. For instance, the T-Mobile ONE No Credit Check used to require a deposit of $50 for the first line, $30 for the second, and $10 for each additional phone. However, the plan was discontinued in January 2017. Sprint also has moved away from security deposits, says Kuda.
The safe no-credit check bet:
The reason you don't hear about deposits much anymore is that the four major carriers now offer robust prepaid cellphone plans, ideal for less creditworthy customers. Assuming you can find a way to pay for your device without financing help, Sprint, T-Mobile, AT&T or Verizon can get you set up with service without deposits, contracts or credit checks.
"Prepaid options may have fewer choices regarding the type of phone you can get, the minutes available, or the data usage provided," says Rod Griffin, director of public education at Experian. "But that doesn’t mean prepaid is a bad choice if it works for you."
Sprint aims to offer wireless service for families of all different budgets and lifestyles, says Kuda. "Service for all of the devices are available on prepaid, and the network quality is the same; the rate plan is just a little different," he says.
Take a look at the current prepaid plans being offered now:
|Top four cellphone carriers' prepaid plans
||$45 for 6 GB of data or $60 for unlimited data (there's a $5 discount if you enroll in autopay). The Stream Saver option allows you to stream more video using less data, and you can roll over what you don't use.|
||$40 for 3 GB, $50 for 5 GB of data, and $60 for unlimited data (prices include $5 autopay monthly discount.) If adding family members, you will get $10 off the regular price per line. With 12 consecutive on-time payments, customers can move to a post-paid account without a credit check.|
||T-Mobile ONE Prepaid, or Simply Prepaid
||$45 for 4 GB, $55 for 6 GB of data, or $75 for unlimited data. Additional perks include unlimited music streaming. With Smartphone Equality, if you make 12 straight months of on-time payments, you'll qualify for device financing (with no credit check). With Data Maximizer, you can stream more video using less data.|
||$40 for 2 GB, $50 for 5 GB, $70 for 10 GB of data, or $80 for unlimited data; unused data is carried over with on-time payment.|
* Pricing effective as of May 8, 2017. All plans have unlimited talk and text in the United States. Fees apply for calls and texts to Mexico, Canada or elsewhere. And, all prices are subject to change.
If you want to shop around beyond the major carriers, Cricket Wireless, Boost Mobile, MetroPCS and Virgin Mobile also offer prepaid service. Although they have similar rates and terms, shared plan options might not be as abundant or attractive. However, new promotions are always coming out, so if you're considering a prepaid plan, be sure to research pricing and consider your data needs as you shop around.
Ultimately, bad credit is no longer a barrier to having mainstream cellular service, but you'll have to find a way to pay for a smartphone on your own. As with most consumer offerings, stronger credit will give you access to more options.
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