Do Phone Contracts Affect Your Credit Score in the UK?

In the UK, pay-monthly mobile phone contracts interact with the credit system in ways that many people do not expect. Although a standard airtime contract is classified as a service agreement rather than a regulated credit agreement, mobile phone providers report payment activity to credit reference agencies on a monthly basis.

This guide explains how phone contracts relate to credit checks, how payment history is recorded, and what happens when payments are missed.

• Yes, it affects your score: Applying triggers a Hard Search (visible for 12–24 months).
• Monthly Reporting: Providers like EE, O2, Vodafone, and Three report to the agencies every month.
• On-Time Payments: Help build your score (slightly).
• Missed Payments: Damage your score significantly.
• Defaults: If you don't pay for ~6 months, you get a Default, which stays on your file for 6 years.

When you sign up for a contract (e.g., iPhone 16 Pro on a 24-month plan), you are effectively taking out a loan for the handset.

1. The Application (Hard Search)

The network checks your credit file to see if you are risky.

• Result: A "Hard Search" is added to your file.
• Impact: A small, temporary dip in your score. Too many in a short time looks desperate to lenders.

2. The Active Contract (Monthly Reporting)

Once active, the account appears on your credit report (Experian, Equifax, and TransUnion).

• Green Tick: Paid on time. Good.
• Number (1-6): Overdue by X months. Bad.
• "D" (Default): Account closed due to non-payment. Very Bad.

3. Regulatory Status

• Airtime (SIM plan): Not a regulated credit agreement (it's a utility service).
• Device Plan (Handset): Often a regulated credit agreement (like a loan). This split explains why you sometimes see two separate Direct Debits or two separate entries on your credit file for one phone.

Limits and defaults

• Late Payment Markers: Recorded if you are even a few days late (depending on the provider's reporting cycle).
• Default Registration: Typically happens after 3 to 6 months of unpaid bills.
• Retention: A default stays on your file for 6 years, even if you pay it off the next day. A "Satisfied" default is better than an "Unsatisfied" one, but the damage is done.

SIM-Only vs Handset

• Handset Contracts: Stringent checks. High acceptance barrier.
• SIM-Only (12/24 month): Medium checks.
• Rolling SIM (30-day): Minimal or no checks (e.g., giffgaff, Smarty, Voxi often don't credit check at all).

"It's just a phone bill, it doesn't count."

Wrong. To a mortgage lender, a defaulted £40 phone bill looks almost as bad as a defaulted £5,000 loan. It suggests you cannot manage basic financial commitments.

"I cancelled it, why are they charging me?"

If you stop paying without officially cancelling (and paying any early termination fees), the network counts it as arrears. You cannot just "cancel" a contract by cancelling the Direct Debit. That leads straight to a Default.

"I paid the debt, remove the default."

They won't. The default is a record of history: "You defaulted in the past." Paying it updates the status to Satisfied, but the record remains for 6 years.

Upgrading

Upgrading your phone usually counts as a new application.

• It triggers a new Hard Search.
• It closes the old account and opens a new one on your credit file.

"Vulnerable" Customers

Ofcom guidance requires providers to help customers in debt. If you are struggling, contact them before you miss a payment. They can move you to a cheaper tariff or setup a payment plan before reporting a default.

1. Treat it like a Loan: Never miss a payment. Set up a Direct Debit.
2. End it Properly: If you leave, get written confirmation the account is closed and the balance is £0.
3. Build Credit: A cheap SIM-only contract is a great, low-risk way to build a credit history if you utilize it correctly.

Phone contract damaging your score? Learn Why Your Credit Score Dropped or check for New Credit Monitoring Tools.