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Moving to a new home means credit checks to secure your mortgage and turn on your various utilities. By the time you call to setup your internet and TV service, it can seem like a never-ending cycle of checks — and you have a right to be concerned.
Repeated checks can affect your credit score and may take months, or years, to roll-off from your credit history. This is in addition to the fact most of us were taught to never, ever give our Social Security number to anyone.
So when the telecom representative on the phone is telling you that you must hand over your info if you want to get connected, what should you do next?
The truth about hard vs. soft credit checks
Hard and soft credit checks, also called inquiries or pulls, have different consequences for your credit history. Hard credit checks can negatively affect your credit score, but both hard and soft inquiries will show up on your credit report.
What is a credit check?
| When does it happen? | ||
| Does it affect your credit score? | ||
| How long will it show on your credit history? |
That being said, it’s best to err on the side of caution and assume that all providers are conducting hard credit checks, unless they specifically state otherwise. To get to the heart of the matter, we reached out to Ted Rossman, an Industry Analyst for CreditCards.com, to get the facts on credit checks.
How do credit checks affect your score?
“Each [hard credit check] typically trims five to 10 points off your credit score for a few months, stated Rossman, but “soft credit checks (such as checking your own credit score) do not affect your credit score.”
In regards to the point reduction due to hard credit checks, Rossman pointed out, “That’s not a big deal if you apply for credit once in a while (and the benefits can quickly outweigh the minimal credit score drop), but applying for too much credit in short order makes you look like a risky borrower and can drag down your score.”
Why does my internet service provider require a credit check?
It’s important to understand why the internet service provider (ISP) is requesting your information. “Internet and TV providers often request credit checks for prospective customers because they want to know how likely that person is to pay their bills each month,” said Rossman.
Similar to when you sign up for a new credit card, companies want to know what type of customer you have historically been. They are trying to assess the risk associated with taking you on as a customer. And the good news, explains Rossman, is “If you have a good credit score, you probably won’t have to put down a deposit.”
There are two main risks that providers are trying to assess for:
- What are the odds that you will pay your bills? The service they are providing is post-paid. Like a sort of micro-loan, the ISP is providing 30 days of service before receiving your first payment. Most companies will give you a grace period of one to two months if you are behind on your bills before cutting off service entirely, so companies try to avoid taking on new customers that could quickly run up several months of bills without making them any profit.
- What is the chance you will return their equipment? The provider is loaning you equipment. That modem, router and DVR is expensive equipment. Most companies charge a lease fee for this equipment, and it must also be returned upon conclusion of service. But it’s easy to forget to return equipment in the hassle of a subsequent move, and unreturned equipment cuts into their bottom line.
So, now you know why new customers undergo credit checks, but what if you’re a returning customer? You’ll have to undergo the credit check process again. The exception being if you had service recently and there is a local office for your provider, you can go in to see if they will reactivate your account as a courtesy.
Pro tip #1: If you know you will be returning to the service provider at some point, a better option is to suspend your service. By suspending service, you can avoid another credit check and one-time setup fees like installation and deposits.
Will bad credit stop me from getting service?
The good news is having average or below-average credit may not stop you from getting service. Rossman explains, “If the prospective customer has a low credit score (or no credit score at all, which happens with many young adults and immigrants), then the provider will probably require a deposit to safeguard themselves against non-payment.”
And “one more thing,” reminds Rossman, “If you’ve frozen your credit (as a defense against identity theft), you’ll need to remember to lift the freeze before your internet/TV provider checks your credit.”
Another possible outcome for those with average credit is that providers will still offer you service, but it may be a modified account. For example, you might be eligible to have TV equipment in two rooms instead of four rooms of your home. This limitation can seem harsh, but this option is by far better than previous methods of credit-monitoring.
How long has performing a credit check been common practice?
Experian, Equifax and TransUnion are the three main credit bureaus that have existed since the mid-1900s. In 1989, FICO created an algorithm to combine the scores of those three credit bureaus.
Prior to that, the methods companies used for collecting credit info on a customer involved home visits and gathering in-person reports from other lenders or even neighbors. Unfortunately, this method led to personal biases and prejudices influencing the outcome. “The possibility that you could walk into a bank and have a good credit history but still get turned down because the banker didn’t like your demeanor was very real,” according to one Business Insider report.
How to get internet without a credit check
While some companies will always require a credit check to sign up for service, other providers will provide you with an alternative option. For no-credit-check internet plans, you may have to prepay your first month of service, pay deposits or show proof of identity, such as a driver’s license or utility bill. Keep reading for more details on plans that don’t require a credit check.
Best prepaid internet and TV plans
DISH offers pay-as-you-go TV packages that do not require a credit check. These no-contract plans let you turn service on or off at your convenience. The trade-off is that you must pay a higher monthly fee, purchase your equipment and prepay all fees.
Xfinity also offers prepaid plans that do not require a credit check. Their internet plan includes up to 20 Mbps of speed, includes a $35 equipment and start-up fee, and is $45 for 30 days of service. The TV plan can be bundled with the internet for an additional $22, and you can even add premium channels such as HBO and Showtime (for an additional fee).
HughesNet has an option for customers to avoid credit checks that entails purchasing the HughesNet equipment of a satellite dish and a modem. The purchase cost is $350-$450 (depending on area), which is a hefty investment considering that the lease fee for the equipment is $10 per month. Over the course of a two-year contract, leasing the equipment would actually save at least $100 for the average customer.
Take a look at this chart to see which providers in your area have different rules.
Providers that require a credit check vs. providers that don’t
Am I safe giving my information over the phone?
If you’re worried about giving your personal information to a representative over the telephone, there are rules in place to protect you. Companies that administer telephone sales are required to comply with the Telemarketing Sales Rule, which lists strict rules about disclosing information regarding the sale and obtaining express consent from the customer.
Most companies are also required to be compliant with PII (personally identifiable information) and PCI (payment card industry) standards, or they stand to put themselves at risk of huge legal fees (we’re talking in the hundreds of thousands of dollars). Read on to find out what these standards mean for you.
How does PCI and PII compliance protect customers?
PCI and PII means that the sensitive info you are giving the representative is being encrypted. For instance, if you are placing an order over the phone, that phone call is likely being recorded.
When you give information such as your date of birth, Social Security number, credit or debit card information, that info is disrupted (typically by a tone). If the call were to be replayed for quality assurance or to resolve a dispute, the sensitive information would forever be masked.
Likewise, sensitive info typed into the ordering system will also be masked (either by symbols, asterisks or otherwise encrypted) so that neither the representative, or anyone else, can view the data after it is initially typed.
Pro tip #2: If you are speaking with a representative, ask them if their company is PCI and PII compliant. If they say no, or they don’t know what you are talking about, that is a bad sign.
Get the best deal on internet and TV service
At the end of the day, you are more likely to get a better deal and lower up-front fees if you do a credit check. If you prefer to avoid a credit check, go with one of the providers that offers pre-paid options.
It also helps to know your credit score so you have an idea of where you will land on the risk-assessment scale. And make sure you don’t owe money to the specific provider you are calling, or you will likely end up with a more restrictive plan, even if your overall credit score is fine.
Ready to see the internet and TV deals you could qualify for? Check out our Resource Center to find the perfect plan for your home.
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