When clients sign for guaranteed mobile phone contracts, it is important to take them as conventional loans and stay committed to repaying them. In spring of 2016, I signed a guaranteed mobile contract with one of the dealers for an iPhone. Though this was my first contract, I was excited and did not take it with a lot of seriousness. Because I had previously defaulted on the credit card loan and lagged behind on my mortgage payment, the personal credit rating was not very good. However, I managed to raise some deposit and secured the phone of choice.
Defaulting on my contract saw the credit score plummet from bad to worse
Immediately after getting the phone contract, I did not draw a plan to manage my credit. I was juggling with different loans without having a clear roadmap for moving to financial freedom. The impact of this was evident in three things;
- Slight delays on the salary caused a lot of penalties from the phone company.
- I defaulted on several occasions, and the negative reports were submitted to credit reference agencies that pulled my credit score down.
- When I tried to apply for a personal loan for an emergency, I was turned away. This is what jolted me to start looking for a long term solution.
Seeking help from a financial expert
Without any doubt, I was in a financial crisis and needed some help. I popped into one of the financial experts next to my home in Manchester and gave my situation. First, he told me it was very sad that I was seeking help when the problem was this advanced. Second, he committed to help me get a workable solution.
- The expert made me understand where the problem came from and what I should have done right from the start.
- He helped me to categorize my debts and review the available lines of income.
- I was advised to start clearing the loans starting with the riskiest.
- He assisted me to identify areas of austerity to create additional lines of income (example cycling as opposed to driving and carrying food as opposed to eating in a restaurant). The released cash was directed to clearing the phone contract and other loans.
Checking and correcting my credit report from the reference agencies
In addition to working on new lines of austerity, I checked on three credit reference agencies and found a lot of inconsistencies. One of the loans I had taken and cleared two years ago was indicated to be outstanding. Upon presenting the documents indicating the loan was cleared, my credit score went up significantly. I was advised to get a free report every 6 months to ensure that the score is correct. In fact, the best thing would have been getting the report and correcting all errors before applying for a guaranteed mobile phone contract.
Borrowing from my account
Because of poor credit score, I needed to build a positive credit history. However, no bank was willing to lend me. I was looked at as a very risky party. To build a positive history, I deposited some cash and asked the manager to lend from the personal account. Now my credit score has improved so much and can be able to get any phone contract.
When you set out looking for a phone contract, it is important to take it very seriously because implications for defaulting are similar to those of a bank loan. It is particularly important to come up with a financial plan on clearing the contract, set new lines of revenue, and avoid negative credit at all cost.