T-Mobile vows to end bad-credit phone pricing with 'Smart Phone Equality' policy

Mobile carriers have a habit of advertising deals for which only customers with stellar credit scores to qualify. Want get a $650 iPhone 6 in your pocket with no money down? Better bring a credit score of 750 with you. Otherwise, your carrier may make you plunk down $300 or even more before you leave the store with it. All the carriers do it, including T-Mobile.

Now T-Mobile is calling that practice unfair, and it is promising to extend great smart-phone deals to everybody, regardless of their credit score. The new policy is called Smart Phone Equality policy, and it launches Sunday.

The hitch: "Unqualified" customers will have earn T-Mobile's trust by paying their bills in a timely fashion for 12 months straight. That's not necessarily a bad policy, but it doesn't seem like a dramatic change. T-Mobile will continue to block the best deals from customers with bad credit scores, but if they're good for 12 months straight, their next phone deal may be sweeter. 

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"We need to build a relationship with the customer," says Matt Staneff, the company's vice president of customer loyalty, "so they'll have more options open to them." Smart Phone Equality is retroactive, so current T-Mobile customers who've been paying their bills on schedule will get credit for time served.

But how big a deal is Smart Phone Equality? Not very big. Here's why.

Regardless of your credit score, the phone costs the same. Today's phone-pricing plans, from all the major carriers, amount to a zero-interest loan to pay for a phone in approximately two years. This isn't like a bank loan, where people with poor credit end up paying higher interest rates. So if a bad credit score forces you to put down more money for a phone, you'll just have a smaller balance to pay off, which means a smaller bill each month. (Of course, you always have the option of paying for the phone in full.) T-Mobile isn't saving anyone money with this new policy.

Bad credit scores rarely hurt carriers. When you sign up with a carrier, in addition to looking up your credit score, the company also takes your credit card. If you start flaking out on your deal, the carrier can always get what you owe from Visa, MasterCard, American Express, etc. It doesn't seem that T-Mobile is taking on much risk to extend this new offer to its customers.

Bottom line: T-Mobile is patting itself on the back for fixing what it calls unfair carrier practices. And current T-Mobile customers may benefit by holding off on upgrading their phones until they enter their carrier's inner circle of trust. But it seems like true Smart Phone Equality would involve T-Mobile earning the trust of its customers, not the other way around.

—Mike Gikas