Why do cell phone companies look at your credit report, and what do they look at?

I currently have at&t cell phone service. My plan was up in August and I’m thinking of going with sprint. My credit isn’t as good as it was 2 yrs. ago. So i’m nervous about not being able to get a new phone with sprint. But i can’t find anything about what cell companies look for in your credit report. Does anyone know??

Answer by James S
They basically look at whether you’ve got into debt or anything where you’ve had to make payments or anything like that. They only want to know if it’s worth their while having you as a customer or whether you’re going to make a mess of the bill payments.

Answer by Mike O
Most providers now have prepaid plans…I did my research based on how little I use the phone and settled with an alltell plan.

In Europe there are no contracts, it’s all prepaid.

What do you think? Answer below!

Don’t they know that the people getting out of contracts are unhappy and will never ever consider using them again? And, the people getting out of contracts will talk bad about that company to all their friends, families, coworkers, perfect strangers? Why don’t cell phone companies make it a smoother transition when people want out of their contracts? Don’t phone companies care anymore about building good reputations?

Answer by Paul in San Diego
Here’s how cell phone contracts work:

Assuming you are entering into a plan that locks you in for at least 2 years, the cell phone provider figures you’ll spend some minimum amount per month (say, $ 50) over that time. And more if you accidentally go over your allotted minutes, messages, etc. That’s a guaranteed $ 1,200 over those two years.

When a cell phone retailer gets someone to sign up for a service plan, they make hundreds of dollars in commission. They then give a huge discount on the phone – sometimes giving the phone away for free – to someone who agrees to the service contract. The amount of commission left over is then their profit.

So, the cell phone provider is out hundreds of dollars up front when someone signs the contract. So, they make it difficult to get out of the service contract, because they want to get their money back.

Answer by Tom C
They need the money to pay those huge CEO salaries. Especially Verizon

Answer by John F
Because you get the phone for free or for a very small fraction of what it actually costs. The company makes up for the cost by requiring a contract that covers the cost of the phone at a bare minimum and guarantees them income.

Answer by Jess B
Thats how a contract works. People are so used to getting things free when they really aren’t free. If you get a phone for free, it actually cost the company who sold it to you around $ 200. Because you signed a contract, they know they are going to get their money back for it for those two years so they are ok with giving the phone away for free. Then you are going to cancel your plan and now they are not going to get the money back that they all ready lost in the first place by giving you a free phone.
Also, when their is a termination fee, that is a deterrent to keep people from changing their minds so much and its pretty much job security for cell phone companies. When people can come and go as they please with their contracts then their isn’t a steady income for the company.

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