Can someone explain this to me? Verizon requiring $400 security deposit?

[Ryan in Maine]

I just went in to Verizon Wireless to open an account. LG enV Touch. Connect plan. 450 minutes. Insurance. Detailed billing.

It should have cost me $100 + $30 activation fee. My bill should have been around $80 a month.

They ask for photo ID. Alright. They ask me to bop in my social security. Alright. To open an account it would require a $400 security deposit. Why? That's just what the computer prompts. Who do I appeal to about that? I don't know.

So apparently it's based on my credit rating. Well, I'm 25, and I've never been late paying anything. I bought my car outright wish cash. I have never owned a credit card and have tried to avoid to at all costs.

Do they require a $400 security deposit because I've never owned a credit card? Is that being held against me?

I didn't think getting a cell phone and a calling plan would be such a hassle.

[Leatherneck]

So apparently it's based on my credit rating. Well, I'm 25, and I've never been late paying anything. I bought my car outright wish cash. I have never owned a credit card and have tried to avoid to at all costs.

Do they require a $400 security deposit because I've never owned a credit card? Is that being held against me?

You've hit the nail on the head, Ryan. It's all about the money they expect to get from you.

TC

[freakazoid]

I'm 24 with a... less than good credit score and I didn't have a $400 deposit. Don't remember what it was but it wasn't that much.

[Headless Thompson Gunner]

Generally, what they want is a documented history of you repaying loans on time.  Obviously, if you've never borrowed any money then you've never paid any loans back, either on time or otherwise.  You have no documented history of good repayment, hence they have no reason to trust you.  You're an unknown risk.

I'm not sure why, but bill payment history doesn't appear in your credit report.  So the fact that you've always paid your bills on time doesn't help you any.

If Verizon wants you to pay a $400 deposit, try someone else.  Or try a prepaid plan.

[lupinus]

From the sound of it you have no real credit history as you say you have no credit cards, bought your car cash, etc.  It's not so much they are holding this against you, it's that you are in the prime age group to run up a big bill and not pay it and they know nothing about you.  Your lack of credit history makes you not just a risk, but an known risk.  Most any carrier is going to need this unless you go prepaid.

My advice?  Bite the bullet, get some kind of loan, and pay it off so you have things on your credit report in good standing.  Someone who starts off responsibly using credit at 18 is going to be in a much better position at 30 to buy a house and such then someone who did nothing but pay cash up to that point.  Even if it's just a low credit line card that you never carry a balance on or use for a tank of gas and pay off each month.  It's worth it in the long run.

[Standing Wolf]

If a company wants a $400 deposit from me, I'll take my dollars elsewhere.

[Ryan in Maine]

Leatherneck:
It's really odd to me though. Seems like things should go cash > credit since one is an immediate payment. It doesn't make sense to me, even though someone could explain the logic behind it to me all day.

Freakazoid:
I don't know where the $400 amount came from and the sales rep couldn't tell me who to go to and find out. A $400 security deposit is absolutely ridiculous. That's likely half of what my car is worth.

HTG:
Bill payment not being factored in to a credit report doesn't make sense to me either. Of course, I don't honestly understand why things are based on a credit report. I don't owe anyone any money. Why would I want to get a credit card? Why would I want to get a loan right now?

I don't think prepaid will work for me. I was looking for unlimited data/text/messaging. $80 a month seems like the best price I was going to get.

Lupinus:
I don't have any credit history. I don't want one either. Especially with the government getting more hands on under the Obama administration.

The whole no credit = risk equation makes no sense to me at all, because the weight of credit doesn't make sense to me at all. I understand the logic behind it, but I think the whole premise that credit > cash/debit/check is an incredibly backwards system.

I don't like the idea of getting a loan just to pay off to get a good credit rating, or even a seldomly used low credit line. That's defeating the whole purpose of what I've been trying to do all these years. Doing something like that makes me feel, um, wrong. Really, really wrong.

I don't even know what I'd get a loan for. Or where/who I should look to get a credit card from. Putting myself in a position to owe someone money just to fit into the system seems unethical.

Standing Wolf:
That's the problem. I only have two carriers to choose from. I have Verizon Wireless or U.S. Cellular. I was excited when Verizon Wireless bought Unicel since I'd be able to choose from some good phones. Unicel basically had the same phones since day one until they were bought out. Verizon Wireless started with more and better phones, and since they bought Unicel, they have added more phones to their roster than Unicel even carried. U.S. Cellular loses reception 15 minutes in any direction from where I'm sitting right now. Not helpful at all.

Question:
Would I run into the same issue if I attempted to purchase a phone and plan through www.verizonwireless.com instead of going into the local Verizon Wireless store?

[K Frame]

Bill payment history doesn't show up in your credit report because not all bills are credit.

Your electric bill isn't credit, so unless you get really far behind on your electric and it's turned over to a collection agency, it won't show on your credit report.

[Chrissy]

I know it doesn't make sense that they would make you give a $400 deposit, but like others have said here, it's because you have no credit history at all - meaning they don't know how you'll be and are therefore a risk.  Seems dumb, but that's how they do it.  They'd rather take someone whose history they know of - even if it's not that great - than someone they know nothing about at all.

But none of that helps you right now.  I would try another phone company, but I can almost guarantee you'll get the same problems with almost all of the other ones.  You can try going a different route with Verizon, like on line, but again, they probably have the same policies on line.  Someone with no credit is a huge risk to them.

I know you don't want any credit, but you will run into this problem all the time if you don't get SOME kind of rating on yourself.  My suggestion is to get a credit card - ONE card - then buy something small and pay it off as soon as the bill comes.  Even if you have the cash and put it in a drawer until the bill comes, at least you are establishing credit for yourself.  You can get credit ANYWHERE.  Almost all stores have credit cards that are for their store.  Go to the local Sears store, buy a wrench, and open a charge account that day (you usually get 10% off all day in the store on the day you open up credit card accounts!).  Credit cards are not bad if you don't abuse them, and it is important to establish credit for yourself.  If you don't, you'll have trouble getting loans, mortgages, car loans, etc. down the line.  Establishing credit is important for so many things including car insurance and things like that.  It determines your rates.

To help immediately with the phone, though, you may want to try some of the track phones or pay as you go phones - there are so many to choose from until you can get credit established for yourself, then they won't ask for a $400 deposit anymore. 

[Headless Thompson Gunner]

Bill payment history doesn't show up in your credit report because not all bills are credit.

Your electric bill isn't credit, so unless you get really far behind on your electric and it's turned over to a collection agency, it won't show on your credit report.

Understood, but it still doesn't make much sense.  How reliably you pay your non-credit bills is a good indicator of how reliably you'll pay your credit related bills.  At the end of the month, you either pay what you owe or you don't. 

Verizon would likely have a new, reliable customer right now if they were able to evaluate Ryan's history of paying non-credit debts.

[GigaBuist]

Understood, but it still doesn't make much sense.  How reliably you pay your non-credit bills is a good indicator of how reliably you'll pay your credit related bills.

For you, yes, it probably would be a good indicator.  However the system has to take into account the dumbest of the dumb amongst us.  That includes people that simply have no idea how to handle an open ended line of credit that aren't in Congress.  You can rack up enormous phone bills quickly on a cell if you don't know what you're doing.  You can buy applications for it, songs, ring tones, etc.  The sky is the limit.  Your $60/month bill can turn into $600 if you're retarded.

It's a little harder to do that with an electric or gas bill.  Besides, those are essentials and the government has gotten their grubby paws into it what with the whole 'monopoly' thing in a given area.

Advice to the OP: Get a credit card.  Personally I'm very happy with my Chase 'Freedom' card.  It kicks back between 1-3% of some purchases in reward dollars.  When I hit $200 they'll mail me a check for $250.  I've probably 'earned back' nearly $1500 in the 2.5 years I've been using it.  Every possible purchase goes onto that card and gets paid off at the end of the month.  Now, I have carried a balance on it a few times around large events like getting married and the honeymoon and such, but for the most part it just gets paid off.   Play the game and you'll build credit and save money at the same time.

About a year ago we're all in the corporate office getting ready for lunch and the boss isn't there.  When it came time to figure out who'd pay for lunch (which would later be paid for by the company) a bunch of us whipped out or wallets, credit cards in hand.  This confused the youngest member of our group.  I gather he's about 25 himself.  We joked about how we all want the reward points and it was totally foreign to him.  He thought it was a scam.  One of the guys explained he gets to fly to China every year off his mileage points.  Others explained what kind of kick backs they get.  I found it rather entertaining, and he, like you, believed one shouldn't really use credit for stuff like routine purchases.  He converted that day!

[Balog]

The credit industry designed the system so it's very hard to function without borrowing. Sucks but there it is. Cash for everything is great, but until you're successful enough to be able to handle things like this out of pocket it's a huge pain.

[sumpnz]

This is the one downside to living a debt free life.  I've got a Verizon cell phone plan, and they didn't charge me any deposit, but then again, when we first signed up for it we weren't on the Dave Ramsey plan yet, so I had a 750+ credit score (I probably still do, takes a while for it to drop after you stop borrowing). 

All I can suggest is that you either pay the deposit, find another cell phone company that charges a smaller or no deposit, or go pre-paid.  Remember too that it is just a deposit.  They have to give it back to you either as a check or a credit against your account after a certain period of time of you not missing any full, on-time payments.  They can't just keep it (unless you owe them as much or more than the deposit and dissapear).

As to the various suggestions that you just succum to getting a credit card, I would respectfully disagree.  It's your call, but I'd just stay away from them.  Even those that do pay their bill in full every month, with a few very rare exceptions, still spend more with the card than they would with cash, and by a lot more than the 1-3% "cash back" rewards.  According to a Dunn and Bradstreet survey from a few years ago credit card users spent 12-18% more than cash buyers.  That extra spending overwhelmes any rewards pretty quickly.  Even if you're 10 times better than average you're still only at around break even after the rewards.

[lupinus]

Ryan.

It does make perfect sense.  You are asking these people extend to you an unlimited amount of their resource with the agreement that a certain amount is paid for and will be paid for on time as part of a contract.  You are also expecting unlimited service in that you can go over that prearranged upon amount and that if you do, it will be paid on the next bill.  The company does not know you and going over on your cell phone minutes can add up FAST.  Ask the parent of any teen who runs up a few hundred dollar cell phone bill in a month.

The company does not know you so they can not use past history with them for any sort of assessment.  So they go to your credit report, nope nothing there either to base any sort of assessment off of.  So not only are you unknown to them they have no way of knowing how you handle your bills and how timely you pay them.  As such, they need a big enough deposit to cover you being a potential loser who has no history for a reason.

It's hard to run up a thousand dollar electric bill or gas bill.  Possible, but still pretty damn hard to do on a cable bill as well.  And even most utility and cable companies are going to run your credit and expect some sort of security deposit.  A cell phone really is not that hard to run up a huge bill in the thousands of dollars over the course of a couple months at .45 cents a minute, songs, ring tones, applications, etc.

If you don't want to continue running into large security deposits forever, I suggest you bite the bullet and get some form of credit that you can keep open.  It doesn't take much to establish credit and long term good standing is more important then huge amounts of credit.  Get a card or two, put something on it every month, pay it off within the grace period so you don't get interest.  With no credit history this may be hard, but try and find one with no membership or yearly fees also.  If you can do that, having the card costs you nothing and will save these headaches down the road as well as help you get lower interest rates on needed credit later on.

[Headless Thompson Gunner]

The credit industry designed the system so it's very hard to function without borrowing. Sucks but there it is. Cash for everything is great, but until you're successful enough to be able to handle things like this out of pocket it's a huge pain.

The credit industry set up the system to make it easy to evaluate people as credit risks.  So far as that goes the system works well.  The problem is entities like Verizon trying to use a credit-risk rating system for something that isn't credit related.  The tool works, they're just misapplying it.

[lupinus]

Actually in a way it is an extension of credit due to the fact he doesn't want a prepaid plan.

He is prepaying for a certain amount with the privilege to go over that amount at a rate that the carrier has decided.  In that aspect, they are extending him credit in the minutes he is allowed to use above the ones he has already pre-paid for.  They use the credit history to determine how responsible the person generally is and likely to do this, and if they do how likely they are to stay within their means to pay it back.  Not all credit has to necessarily be in the form of cash.

[Headless Thompson Gunner]

Eh, Verizon isn't actually loaning any money out.  They might decide to let him run up a tab (or they might not), but that isn't a loan.  Recall that the credit rating system was set up specifically to address the repayment of loans, not the timely payment of other types of bills.

I think the credit rating system should include non-credit type bills and obligations along with loan repayment.  The two types of payment are related closely enough that they're interchangeable for this purpose.  If if not include these in credit reports, then set up a new reporting system that tracks payment histories for non-credit obligations.

[lupinus]

I agree it should be there.  IMO if you run someones credit report you should have to in turn report their payment to their credit report.  If you won't report, you can't run the report.  But I do not think credit has to be specifically loaned out money.

IMO, anything acquired without being paid for at that time has had credit issued.

[Headless Thompson Gunner]

I guess I think of credit differently.  A service that is billed periodically doesn't strike me as credit.  It might be a different matter if Verizon was planning to let him run up a limitless bill, or carry a balance over from month to month, or something of that sort.

[Firethorn]

I guess I think of credit differently.  A service that is billed periodically doesn't strike me as credit.  It might be a different matter if Verizon was planning to let him run up a limitless bill, or carry a balance over from month to month, or something of that sort.

But, in a sense, it is credit.  Some people have to put a deposit on file(pre-paid) for their utilities, because they have a history of not paying.

Heck, it's credit when you sit down at a restaurant and eat before paying - Fast food joints don't do that.

My advice?  Bite the bullet, get some kind of loan, and pay it off so you have things on your credit report in good standing.  Someone who starts off responsibly using credit at 18 is going to be in a much better position at 30 to buy a house and such then someone who did nothing but pay cash up to that point.  Even if it's just a low credit line card that you never carry a balance on or use for a tank of gas and pay off each month.  It's worth it in the long run.

Sounds like a tale of me and my brother - I got a credit card at 18, my brother didn't.  I will admit to paying interest on it occasionally.  I also bought a computer on one of those 12 months no payments/no interest plans that involves a credit card.  I DID get it paid off though.

Anyways, fast forward 10 years, my brother is having difficulties getting credit to buy a house, he bought his car using cash.  I bought a new car after coming back from overseas(where I drove a car I paid cash for), with 0% interest loan, have many thousands of dollars in limits on my CC's.  Banks have no problems with pre-approving me for a quarter million dollars towards a house.  I mean, it was high enough that I wouldn't be comfortable with the monthly payments.

In your case, I'd shop for the best credit card you can get.  Use it regularly, no need to pay interest.  If you end up with one that has annual fees - after the first 11 months start looking for one without, or request that they be removed.  Pay it off in full each month, paying interest is NOT necessary to help your credit score.

[slingshot]

I been using Verizon for a long time.  I don't recall if I had a deposit on the initial account or not.  They call me to upgrade my phones.  I say... nah... these work fine.  But I do usually get a new phone every few years.  That means three phones in my case. The deal there is they want you under contract to them.  It's simple.  Verizon does not carry over unused minutes from a previous month like AT&T Singular and now you can keep your cell phone number with a new provider which eliminates a big headache with changing phones if people associate you with a certain number.

I would suggest you get a credit card or two.  Use them and pay the bill off monthly.  I would also ask when the deposit will be refunded and if it collect interest during the period it is held.

[KPT]

Verizon does not carry over unused minutes from a previous month like AT&T Singular and now you can keep your cell phone number with a new provider

The ATT rollover is a gimmick. I'm an Alltel (now VZW) customer. I've run up 5000 minutes a month and been Well under the 900 minutes of my plan. The my circle plan makes much more sense than a rollover plan. I'm just glad vzw adopted it.

Several of my friends have ATT. They are unhappy with the coverage. The old commercials about fewest dropped calls are funny considering GSM is inferior to CDMA in that regard.

[KD5NRH]

The old commercials about fewest dropped calls

Are absolutely true; after all, if the call never goes through in the first place, it can't be dropped, can it?  AT&T is really thinking outside the box these days.

[lupinus]

Are absolutely true; after all, if the call never goes through in the first place, it can't be dropped, can it?  AT&T is really thinking outside the box these days.

I'm a VZW customer as well and am satisfied with them completely.  The CS isn't the best, but they don't argue about reversing their screw ups IME.

[Calumus]

When I got out of college back in 2000, moved home and had to get a cell for work. Verizon needed a $500 deposit from me because like you I had no credit history. I got the deposit back by check a year later with interest. It ended up being like hitting a big scratch off because after a year I had completely forgotten about the deposit, and then one day a check for $580 or so showed up in the mail.