The Liverpudlian will be releasing a single in time for Christmas, called At This Time of Year, and has signed a deal worth a reported £500,000.
He has now pledged to donate half of the proceeds of his single to go to others with Down's Syndrome.
He admitted: "I didn't even realise I could sing."
John Reid, managing director of WEA records, denied that Phillips had been signed up because of the novelty factor.
"I do not make novelty albums. And I do not sign people to five-album deals just because they were in a popular TV series.
"I have signed Craig because he is very talented singer and fans will buy his records because of that. Not because he won Big Brother."
The omens are not good for Craig - fellow Big Brother contestant Nichola failed to chart with her single, The Game.
But that hasn't put off either the WEA bosses or Craig.
"When I heard Craig sing I was amazed. Now I am convinced we've got a number one Christmas single on our hands," said Mr Reid.
The song has been written by the Rive Droite team, who have penned hits for Cher, Kylie Minogue and Ricky Martin.
Craig said he was delighted with the song.
"I've never sung in the bath, let alone a recording studio, so I was obviously very nervous.
"I never realised I had a voice before but I surprised myself - it's actually pretty good."
The track was recorded in just two days and will face stiff competition from Westlife who are the favourites for the festive number one.
Steve Allen, head of WEA's star-spotting division, said: "We have a strict policy of never signing novelty acts.
"Believe me, we wouldn't have paid this kind of money if we didn't think Craig was up to it."
Craig, Anna, Mel and Nick, who were all trapped together in the Big Brother house, are set for a reunion as presenters of TFI Friday on 17 November.
The quartet are following in the footsteps of the Spice Girls, who last week presented the first programme in the new series of TFI Friday following Chris Evans' decision to step down.
The single, At This Time of Year, is released on 11 December.