Vodafone customers warned of upgrades affecting credit score
Vodafone UK customers need to be warned that upgrading their account can potentially harm their credit rating, if not checked. Whilst we are always seduced by a phone upgrade and for many it is an incentive to stay with their mobile phone provider, we would never imagine that a simple upgrade could severely damage your credit rating.
Vodafone Charging Your For Accounts You Don’t Have
There have been numerous cases of the years of customers and non-Vodafone customers being in debt for accounts that are not active. (Source: This is Money)
In one case, 26-year-old Holly O’Donnell’s credit rating showed a history of missed repayments with Vodafone, for an account that she did not have. Whilst she complained, it was only rectified when the Mail on Sunday got intervened.
In a recent case, Elena Murray from Staffordshire had a terrible incident with Vodafone involving her boyfriend. He received a free upgrade and a new phone, but whilst a new account was set up, his old one was still running in the background without his knowledge and he was accruing charges of around £45 per month that were going into arrears, month after month.
The couple only realised the impact when they had found their dream home, had put in an offer (after getting a mortgage in principle weeks before) but they were denied a mortgage due to the boyfriend’s sudden fall in credit rating. Eventually they lost out on the house and have since needed to rent, which they believe has cost them more money in the long-run. See the video as shown on BBC Watchdog below:
What Happens If Your Credit Score Falls?
Fortunately in the case of Elena’s partner, Vodafone eventually removed the default charges and records on his credit file and offered £50 compensation (very small in our opinion)>
But ultimately, any negative marks on your credit file or things that show it is falling suggests to potential lenders and creditors that you are struggling to keep up with financial payments. For the mortgage lender it becomes a no-brainer – heck, if the person cannot repay £45 each month for a phone bill, what are the chances that they can pay thousands each year on a mortgage?
No only are you potentially denied credit, but you any credit that you do get comes at a higher price, because you are considered a high risk of default. For a credit card, your fee can increase from being 0% interest for the first 3 years, to being charged around 30% APR.
Having a bad credit score can make it difficult to get credit and you may need to look at alternative sources of finance if you really need a loan. This includes using secured loans whereby you have to put down something as security or collateral but you risk losing this if you cannot make repayments. Common things used as security including homes, cars, bikes, jewellery and art.
Another option is of course a loan with a guarantor – whereby you leverage the credit score of someone else (with a good credit rating) and they agree to repay your loan if you cannot. This is something that we compare on our website and try help our customers get the best rates possible.
What You Can Do To Improve Your Credit
You automatically get a credit score in the UK when you turn 18 and you will be in the position of zero or no credit, so you have to build this up.
You can start by joining the electoral roll which makes you eligible to vote. This also proves to your Government that you are a real person with a real address – and this is something that naturally a lender will value more than a person with no real links.
You can start building up your credit rating. This does not mean taking out big loans or anything like that but even a simple credit card with a small credit limit – and you can pay 0% for quite a long time if you clear it every month, costing you nothing in the process. There are also specific credit builder credit cards designed to help you repay quicker and boost your credit rating.
You need to get into the practice of paying off cards and loans on time, which is why repaying your guarantor loan on time every month can improve your credit score.
You have to be careful not to take out too many credit cards as you get a credit limit with each for a few hundred or thousand pounds.
And if you have many credit cards or store cards available to you, even though you may not plan on using them all, potential lenders and creditors don’t know this and they think that you could potentially have access to £10k or £20k – meaning that any repayments they have could be at risk. So you are recommended to only get cards that you will actually use and close any that you do not.
How Checking Your Credit Score Regularly Can Avoid Issues
There is clearly a huge benefit to checking your credit file regularly. There is no question that in the case of Elena, if her boyfriend had signed up to a service like Noddle or Clearscore, they would have been alerted by the first missed payment and addressed it before it got out of hand.
These credit score services work by giving you a 14-day free trial and then charging just a few pounds per month. You get a text message and email every time there is a search on your credit file or a missed repayment – allowing you to be on top of your financial transactions and also aware of anything potentially harmful. So you can be conscious of any loan applications that you have already made or if you are a victim of fraud and someone is making applications in your name, you can be on top of it.
You can also request a copy of your credit file for just £2 and have a look. Credit reference agencies are legally obliged to offer this and it allows you to check any previous transactions. However, this is just for one period of time and there is certainly a merit to receiving updates in real-time.