Missed mobile bills hamper future credit
Paying your mobile bill late or not at all puts your chances of obtaining credit, including mortgages, at risk.
One in seven people has paid a mobile phone bill late or not paid it at all, according to a survey by Ocean Finance revealed.
Missed or non-payment is particularly a problem for young adults, with nearly a quarter of 18- to 24-year-olds affected – compared with 14% overall.
Half of those who took part in the poll blamed delays on unexpected large bills - with call charges or overseas roaming charges cited by 12% as reasons why they couldn't pay their mobile phone bills.
Some 25% admitted that unexpected excess data usage had meant they delayed or didn't pay their mobile phone bills.
A further 35% claimed other monthly bills had caused them to run short of money, which suggests that some people are not prioritising their phone bills.
Mobile phone contracts are a form of unsecured credit and missing even one late payment in the last year can affect your chances of having a loan or credit card approved.
Mobile phone companies are stricter than other lenders when declaring that a customer has defaulted on a payment, doing so after just three missed payments. This compares unfavourably with credit card companies that allow six missed payments before declaring a customer in default.
Ian Williams of Ocean Finance says: "Many people don't realise a mobile phone contract is unsecured credit and that they could be jeopardising their credit records by not paying.
"A common situation is that people take their phone on holiday abroad, rack up a large bill and then either can't or won't pay."
He added: "When you are applying for credit, including mortgages, lenders will look at any late or missed payments from within the last three years, but the impact of any defaulted payments lasts for six years. So a default on a mobile phone bill from five years ago could still be stopping you from getting a loan, new credit card or, in a worst case scenario, a mortgage, regardless of how good your credit record is otherwise."
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.