T-Mobile to extend smartphone financing to customers with bad or no credit
Resurgent wireless carrier T-Mobile on Thursday announced a new "smartphone equality" initiative that will see the company base device financing decisions for existing customers on their T-Mobile payment history, rather than their credit score.
Under the program, any T-Mobile customer who has made payments on time for 12 consecutive months will be eligible for all of the carrier's financing options, including those that offer no-interest payment plans with no down payment. Customers who have already been with T-Mobile for at least 12 months will immediately be eligible when the program goes live on Jan. 25.
"This is not only the right thing to do. It's the smart thing to do, too," T-Mobile CEO John Legere said in a release. "Fact is, your past payment history is the best way to tell if you'll make future payments on time. So this is good for customers and good for business."
"Ultimately, this initiative will lower the barrier for millions more Americans to get a smartphone - the most transformational technology in our lifetime," Legere added in an accompanying blog post. "At a time when mobile connectivity is sweeping the globe, the United States ranks a miserable 13th in the world in terms of smartphone penetration − behind a dozen countries including Australia, Ireland, Israel and Saudi Arabia among others."
Customers who currently have a prepaid relationship with T-Mobile can use that time as credit toward the smartphone equality program if they move to a postpaid plan.
Under the program, any T-Mobile customer who has made payments on time for 12 consecutive months will be eligible for all of the carrier's financing options, including those that offer no-interest payment plans with no down payment. Customers who have already been with T-Mobile for at least 12 months will immediately be eligible when the program goes live on Jan. 25.
"This is not only the right thing to do. It's the smart thing to do, too," T-Mobile CEO John Legere said in a release. "Fact is, your past payment history is the best way to tell if you'll make future payments on time. So this is good for customers and good for business."
"Ultimately, this initiative will lower the barrier for millions more Americans to get a smartphone - the most transformational technology in our lifetime," Legere added in an accompanying blog post. "At a time when mobile connectivity is sweeping the globe, the United States ranks a miserable 13th in the world in terms of smartphone penetration − behind a dozen countries including Australia, Ireland, Israel and Saudi Arabia among others."
Customers who currently have a prepaid relationship with T-Mobile can use that time as credit toward the smartphone equality program if they move to a postpaid plan.
Comments
Otherwise I think we'd be much worse off right now when it comes to pricing and service.
Rewarding existing customers - it gets my goat here in NZ when the telcos come out with these attractive offers for new customers while their existing customers get f'all. They effectively make it an easy choice to switch networks ! Back asswards - they should look after their existing customers, well they do kinda (at contract renewal time) but not as well as they should.
This is definitely something that had been happening in the mortgage industry when Congress pressed Fannie Mae to make banks give loans to people with alternative credit - and income. Like people without banking accounts and credit scores. I believe that extended to other industries - there is an alternative credit scoring industry based now on how you manage credit cards, but on how you pay your bills.
Let's face it. Many people are just not good with credit. They are better with cash/checking. And a good chunk of them do pay their bills on time.
FICO credit models do change, but they seem geared toward how much revolving credit you have. The world does not all run like this. Some people just live on cash and maybe a checking account and don't or can't have revolving credit. There is a large population of people who are shut out and it looks like T-Mobile realizes this. Well, Joe So-and-So pays his T-Mo bill diligently each month. So why not expand to selling him a smartphone?
It all makes sense, although there is probably a chance to be an increase in credit defaults and all T-Mobile customers will pay for that. But if it brings in more revenue, then maybe T-Mo can invest even more in their network, increasing customers even more.
They will probably get a lot more customers from other carriers.
If ATT had bought T-Mo, we'd all be screwed even more. We were on ATT then moved to T-Mo a few years ago and we are very happy customers. Yes, we are in the city 99% of the time. LTE is great. We save a lot on our bills each month. My daughter in Europe can keep her line and use it when she visits the states. And I don't have to pay $40 for her separate line while she is gone (only $10). The billing is EASY to understand. If there is an issue, we can call customer care and get great service, and a lot less corporate-ty than ATT. T-Mo is simple. It's all good. And now T-Mo is shaking things up.
Hopefully this huge jump in subscribers will push them to increase their coverage.
I like Legere, but could have done without the unprofessional, awkward cuts in there, as well as the Starbucks ad that looked like ridiculous product placement- even if it wasn't.
I appreciate his candidness but it somehow his presentation (choice of language, dress, hairstyle, something) gives it all the air of creepiness from a snake oil salesman. I'd like to see him more subdued in his demeanor (although this video being perfectly fine), more than a change to the words he uses in interviews.
In some ways he reminds me of when Homer Sumpson went to go work for Hank Scorpio of Globex Corporation.
cc: [@]GTR[/@]
Because this strategy worked out so well in the housing sector...
Hopefully Apple receives up front payments for their devices from T-Mobile. This looks like a last-ditch desperation move on Legere's part.
Zero down for all is an great way to attract more customers.
T-Mobile-bubble
Off Topic I know but is it just me or does this guy totally look and sound like he could be Scott Forstall's dad?
I wish T-Mobile existed at all in my State. Just Verizon really.
There's one problem with this new strategy:
The people with excellent credit will be subsidizing those with bad credit who default.
I don't see it that way, at all. T-Mo isn't providing "Zero Down" if you have no previous business relation with them and poor or no credit history. However, they will let you independently build credit with them and will give you the benefits of "good credit" if you have (or establish) 12 months on time payments for T-Mo service.
That isn't subsidizing bad credit, that's rewarding good credit and honoring good business from previously established customers.
Also it's a gross assumption to state that people with good credit will subsidize. Threre is sure to already be a default rate anyway. And there could be across the board slight bump in a rate. But at the end of the day is more subscribers and better revenue and likely a better investment.
Also we do know that service can be bad on any carrier depending on where you live.
And at the end of the day I'm getting better service. Better customer service. Less scamming from att and more competition and a cheaper bill. It's all a winning situation.
Some long standing corporations like att will likely always be terrible for the consumer.
Fixed that for you.
The word used in the context you apply here doesn't mean what you think it does.
If a company gives money away, it either goes out of business or the CEO is replaced.
Some folks posting here should stick to technology...
Because this strategy worked out so well in the housing sector...
Hopefully Apple receives up front payments for their devices from T-Mobile. This looks like a last-ditch desperation move on Legere's part.
It is smart move by T-Mobile. Responsible people can have bad credit for lots of reasons including divorce, temporary job loss, identity theft, ect.
Looking at the payment history of current customers as opposed to credit reports is more likely a better indicator of it's own customer's credit worthiness. It also saves T-Mobile money on obtaining credit reports.
I don't see it that way, at all. T-Mo isn't providing "Zero Down" if you have no previous business relation with them and poor or no credit history. However, they will let you independently build credit with them and will give you the benefits of "good credit" if you have (or establish) 12 months on time payments for T-Mo service.
That isn't subsidizing bad credit, that's rewarding good credit and honoring good business from previously established customers.
Exactly smart business. Further, why should T-Mobile pay for credit reports when it already has first hand knowledge of its customers credit worthiness?