Signing up for a new wireless plan can reveal unsavory surprises, from restrictions on sharing your bandwidth with a laptop to limits on the resolution of streaming video. But even the most straightforward subscription usually involves a less obvious cost: letting the carrier perform a detailed inspection of your credit history.
That took Steve McLeod, a retired project manager in Clearwater, Fla., by surprise when he tried to sign up for the Kickstart Unlimited plan that Sprint briefly offered. Sprint wouldn’t let McLeod do that unless he first gave the firm permission to get a full copy of his credit report.
That detailed inquiry, often called a “hard pull” and a standard part of getting a new credit card or loan, has become almost as routine in the wireless industry when signing up customers for traditional subscription plans.
“Cell phone companies pulling hard credit reports has become the norm,” said Nichole Mustard, co-founder of the personal-finance service CreditKarma in an email. “If you’re a new customer or buying a new phone on a monthly payment plan, companies could use your credit score to determine the type of payment plan options you’ll be offered and whether they’ll require a deposit.”
CreditKarma’s Mustard emphasized that a hard pull of a credit report — while it may feel invasive — should do no long-term harm to your credit rating by itself. Repeated hard pulls, however, can look bad depending on the context.
“For example, if you’re shopping for a mortgage, banks understand you’re going to apply for multiple loans in a short period of time to find the lowest interest rate,’ she said. “But if you apply for five credit cards on the same day, that’s another story.”
Kickstart’s required subscribers switching from another carrier to either bring their own phone or pay Sprint a new phone’s full price upfront–which, unlike Sprint’s standard offer, didn’t leave the Overland Park, Kan., company on the hook for any handset costs.
Kickstart did, however, have Sprint billing for service after providing it. That ”postpaid” structure still leaves the carrier exposed to some financial risk.
Sprint said requesting a full copy of a potential Kickstart subscriber’s credit report fit into its standard practice, but one wireless-industry analyst called it “strange” with only service costs at stake.
“The money at risk is relatively low, and if the carrier suspects fraud they just cut the person off,” said Roger Entner, founder of Recon Analytics. A carrier incurs much more risk when it lets a customer lease a phone or pay for it in installment plans–as, he noted, Sprint learned the hard way.
In a May 2017 annual report filed with the Securities and Exchange Commission, Sprint cited losses of $481 million on phone leases “where customers did not return the devices to us.”
To avoid a hard pull of your credit, you’ll usually have to decline postpaid service in favor of “prepaid” service–where, as that term suggests, you pay at the start of a month for the service you get over the rest of the month.
These services, sold by carriers under their own brands and those of subsidiaries like Sprint’s Virgin Mobile USA and also by third parties that resell their networks, can offer substantial savings to customers who talk, text or go online less than average.
Some, however, require the equivalent of a down payment. T-Mobile’s No Credit Check plan, for instance, comes very close to matching the features of its postpaid plans but requires a refundable deposit: $50 for the first line, $30 for the second, and $20 for lines three, four and five.
Rob Pegoraro is a tech writer based out of Washington, D.C. To submit a tech question, e-mail Rob at firstname.lastname@example.org. Follow him on Twitter at twitter.com/robpegoraro.
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