Credit Score Basics > Does cancelling a mobile phone contract affect credit rating?

Does cancelling a mobile phone contract affect credit rating?

Wollit Team2 minute read · Updated 29th June 2024

A mobile contract is actually a credit agreement. This means that cancelling a mobile phone contract can affect your credit rating in the UK.

Let’s have a look at what exactly happens when you cancel your phone contract and how to make sure your credit score is safe.

How does cancelling a mobile phone contract affect my credit score?

Cancelling a mobile phone contract can affect your credit score in several ways:

Having a mobile phone contract can provide you with a line of credit that can improve your credit history by making regular payments. Cancelling a mobile phone contract can mean that this line of credit is now closed, which means that you have one fewer tool for credit-building.
If you cancel a mobile contract because you want to switch providers, the new provider will have to run a new credit check on your credit report. This credit check is called a “hard check” and it can lower your credit score temporarily. It also stays in your credit report for up to two years, and is visible to other lenders. Having multiple heart checks in a short amount of time can further lower your credit score. Experian recommends not more than two hard checks on your credit report within any six months.
Cancelling a mobile phone contract also reduces your credit mix. Credit mix is important because lenders want to see that you're managing multiple kinds of debt: loans, mortgages, credit cards, and so on. Having one less type of credit can lower your credit score.

In short, cancelling a mobile phone contract may not seem like much but it can actually have quite a bit of an impact on your credit rating, especially in the short term.

What can I do to reduce the impact of cancelling a mobile phone contract on my credit score?

If you really must cancel a mobile phone contract, there might not be much you can do immediately. If you can, try to avoid switching your providers, especially if you’re preparing for an important credit application – like a mortgage.

In any case, the best thing you can do to minimise the impact of cancelling a mobile phone contract is to keep working on your credit score.

Luckily, now there are many apps that can help you build and improve credit.

One such app is Wollit. Wollit is an app available both on Android and iOS, and it works by reporting a fixed-fee monthly subscription as a loan repayment to all three credit reference agencies.

This directly builds your credit history and gives you a chance to improve your credit score and soften the impact of minor negative blows to your credit score – like cancelling a mobile phone contract or switching providers.