How to get a cell phone if you have bad credit
Proliferation of pay-as-you-go phones means bad credit doesn't have to cost you
By Tamara E. Holmes | Published: July 6, 2010
If you have bad credit, you'll likely pay more for mortgages, loans and credit cards -- if you qualify for them at all. But if you're in the market for a cell phone, not only can you find a plan that will work with any credit situation, but you may save money in the process.
"There are lots of options for consumers with bad credit who want to get a cell phone," says Amy Storey, director of external communications for CTIA-The Wireless Association, the international trade group for the wireless telecommunications industry.
That wasn't always the case. Since mobile service providers have customarily run a credit check before signing new subscribers to make sure they are capable of paying their bills, a low credit score left some consumers without cell phone service. While the impact of credit on a cell phone contract hasn't changed, the number and quality of pay-as-you go options has, giving consumers more choices for service that doesn't require a contract or a credit check.
A pay-as-you-go smorgasbord
Unlike cell phone contracts, which give consumers a set amount of minutes to talk per month before charging additional fees, pay-as-you-go plans work like a calling card. "You might say, '$20 a month is what I'm going to put on my card,'" says Storey. When you've used the allotted money, you must refill the balance. "It allows you to be very structured, and you'll never exceed that amount unless you want to," Storey says.
When John Wilder moved from Indiana to Florida three years ago to start a contracting business, he had maxed out his credit cards, yet he still needed cell phone service to be able to get in touch with potential customers quickly. When a friend told him about the TracFone, a prepaid wireless option from TracFone Wireless, he started researching pay-as-you-go plans and settled on the NetOne Phone Card by NetOne International. "It was only 10 cents a minute, and since I didn't make that many phone calls, I was probably saving $80 more a month than if I had had a contract," he says. Though Wilder could easily get a contract today, "I've never gone back to the contracts because pay-as-you-go is a whole lot cheaper."
While companies such as TracFone and NetOne may have pioneered the pay-as-you-go space, all the major wireless carriers have now jumped on board.
- Verizon Wireless Prepaid service charges up to 25 cents per minute, with lower rates if you pay a daily access fee of between $0.99 and $3.99 on days that you take or receive calls.
- Sprint's Common Cents Mobile program charges 7 cents per minute and 7 cents per text, rounding down for each minute rather than rounding up as many other providers do. For those who have fallen on particularly hard times, Sprint offers its Assurance Wireless program in Maryland, Michigan, North Carolina, New York, Tennessee, Virginia and Texas. "Households who are on programs such as Medicaid, public assistance and other federal programs are generally eligible," says Jack Pflanz, a spokesman for Sprint Prepaid. Eligible residents get a free cell phone and 200 free minutes each month, with bad credit playing no factor in eligibility.
- T-Mobile's FlexPay plans let customers pay upfront even for unlimited talking plans, says spokesman David Henderson. For $50 a month, customers can skip the credit check and have unlimited voice and text services.
- AT&T's GoPhone Pay As You Go service offers a variety of plans including a 25 cents per minute plan and a $3 unlimited calling plan, which simply charges $3 per day only on days you use your phone.
Contracts still the norm
Despite the variety of options offered by pay-as-you-go providers, 80 percent of cell phone users still get their service via an annual contract, says the CTIA's Storey. Some aren't aware that so many options exist in the pay-as-you-go space. Others prefer to use other types of phones or personal digital assistants (PDAs) that are not a part of pay-as-you-go plans.
Another benefit of having a cell phone contract: "With contacts, the handsets themselves are greatly subsidized," says Storey, so you might pay more upfront for the phone itself if you go with a prepaid plan.
Some heavy cell phone users might also save more by sticking with a contract. If you're one of them but your credit has taken a hit, you may be more readily approved if you agree to pay a deposit for your phone service. The lower your score, the higher the deposit requirement tends to be.
The bottom line: Cell phone providers want the business and will look for a way to accommodate you no matter what your credit situation is, Storey says. If you go to a carrier store, tell them about your financial situation and how you plan to use the device, she adds. "They'll work with you."
See related: Help for bad credit, Getting a cell phone? Mind that other number: your credit score, Why cell phone payments don't help your credit, Will that be cash, check or cell phone?, Bad credit customers pay more for Apple iPhones
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