Credit rating risks increasing

Cellphone users default on payments


Staff Writer

Cellphone users are increasingly failing to meet installment contract obligations for the devices and are thus damaging their credit ratings, a Tokyo-based credit information firm told The Japan Times Tuesday.

As of February, about 1.55 million people, or 3.4 percent of everyone who purchased cellphones by installment, failed to pay their bills for three months or longer, according to Credit Information Center Corp.

The number is 1.6 times higher compared with some 920,000 people using such contracts, or 2.4 percent, in December 2010, when the law obliged businesses to provide customer credit information to data firms, including CIC.

Even before the law kicked in, CIC had analyzed cellphone purchasers’ credit data. When compared with 210,000 cases of default in June 2010, the latest figure is 7.3 times higher, it found.

As more and more people opt for expensive handsets, they increasingly enter into installment payment contracts, rising from 38.21 million in December 2010 to 46.6 million in February, the firm said. Installment payment customers have surged by about 1 million to 2 million per month in the past six months, and about 30 percent of them are teenagers and those in their 20s.

For those people, monthly bills include not only handset costs but also fees for voice communications, Internet connections and, for many, online games and smartphone applications.

“As cellphone technology gets more advanced and diversified, the prices of handsets are getting expensive,” CIC spokesman Hiroyasu Soeda said, noting that behind the growing number is the fact that it’s easier to purchase expensive handsets by installment.

Smartphones cost around ¥40,000 to ¥80,000 per unit. According to a Softbank Corp. spokeswoman, most of the customers who purchase the high-end models, which cost ¥70,000 to ¥80,000, go on installment plans, spreading the costs to up to 24 months.

Once credit users fail to pay installment bills for three months or longer, this default information will be shared among credit and loan companies, and the information remains on record for five years after the end of credit contracts, Soeda said.

“It may affect when (such customers) use credit the next time,” Soeda said. “To keep consumers from becoming heavy debtors, (credit or loan) companies check our credit records. In some cases, the companies may question customers’ ability to pay.”

A survey by researcher comScore Inc. shows 14.56 million people aged over 13 used smartphones as of October, about 52 percent of whom are under age 35.

Music pirated for phones


Three people were arrested Tuesday for allegedly illegally copying popular songs for distribution to cellphones, police said.

Arrested were cellphone vendor Tadao Fukushima, 49, and two unnamed accomplices.