MSE News: Beware split tariff mobile contracts if you're about to apply for credit

in Mobiles
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If you're planning to buy a latest model phone from O2, be aware that you'll actually be taking out a loan
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Beware split tariff mobile contracts if you're about to apply for credit'

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  • A_Flock_Of_SheepA_Flock_Of_Sheep Forumite
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    The old bundled tariffs are just a hidden way of having an expensive phone on 0%.

    The new split was is a good idea. The simple answer is if you can't afford a handset on Refresh don't buy one.

    It is high time the other mobile providers followed suit on this split. In fact it should be legislated. The rip of that is paying for air time you don't use if you need or want to cancel early is nothing more than daylight robbery.
  • kingstreetkingstreet Forumite
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    The mortgage lenders who normally ignore mobile phone payments in assessing mortgage affordability would doubtless insist on the credit commitment for the handset being included in affordability calculations, resulting in lower mortgage borrowing power.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • A_Flock_Of_SheepA_Flock_Of_Sheep Forumite
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    The credit commitment on Refresh is £480 maximum over 24 months. Hardly a massive sum in this day and age. If you add any handset to a refresh plan if it is over £480 you have to pay some towards it in a lump sum.

    In fact the monthly commitment on a non split tariff is greater than on refresh. At least on refresh the airtime can be cancelled leaving only the handset commitment.

    So logically mortgage lenders should view a split mobile tariff in a favourable way over a normal one.
  • Good. The current practice of bundled tariffs should be made illegal. Then mobile network operators would be banned from claiming they are "subsidising" the cost of your handset, and that imposing SIM locks is a way to 'protect' their investment. The networks will be forced to comply with stricter Consumer Credit Act regulations and hopefully their conduct will be regulated better by the FCA than has been the case with Ofcom
  • A_Flock_Of_SheepA_Flock_Of_Sheep Forumite
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    Exactly Jumbo. I applaud O2 and Tesco for introducing this split system and like I say it should be outlawed the way other operators bundle the handset with the airtime to bring everyone into line with this system.

    Interestingly thought carriers speak of subsidising handsets yet on O2 refresh and iPhone 6 128GB costs £789 either up front or via installments on their O% loan scheme yet outright from Apple the same model is £699.
  • minislimminislim Forumite
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    O2's refresh deals are not 0% loans as the prices of the handsets they offer are always dearer than the RRP.
  • A_Flock_Of_SheepA_Flock_Of_Sheep Forumite
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    minislim wrote: »
    O2's refresh deals are not 0% loans as the prices of the handsets they offer are always dearer than the RRP.

    A bit like catalogue books were then. You always paid more for things on those so you could pay weekly!
  • AnonAnon Forumite
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    The o2 Refresh Tariff has been around for 18 months now - where have MSE and others been in the meantime if this was going to cause an issue? By now, if it was causing an issue, you would expect to see lots of comments in the press and on here about the impact it has had on credit raiting?

    Anon
  • aldreddaldredd Forumite
    925 Posts
    Fuss over nothing, as is normal these days with MSE.

    a 400/500 pound 0% loan is hardly going to be seen negatively - and if it does block further credit applications, then there must surely be something else (more significant) behind such a decision?

    In fact, seeing a small 'loan' paid off may well be a positive thing for people looking to build up their credit rating.
  • JimmyTheWigJimmyTheWig Forumite
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    with these split tariffs, while the airtime part of the contract shows up as as a normal mobile contract on your credit file, the handset part shows up as a loan
    As it should. You can't cancel without paying it off, so in effect you are borrowing the money to buy the phone.
    despite the fact there's no interest to pay.
    If it costs more to buy the phone in this way, which it invariably does, then while it may be 0% interest it is not 0% APR (in the true sense, at least).
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