Myth #: Paying My Utilities Bills On Time Will Improve My Credit
Unfortunately, this isnt the case. Utilities and most cable/Internet providers do not report payment histories to the credit bureaus unless payments are in default. If payments are up to date, they will not influence your credit score. If payments get behind or go to collections, they can be reported and will have a negative affect on the credit score. One exception to this appears to be Rogers Cable, which some have said are reporting to the bureaus regularly. Cell phone companies also report payment histories to the credit bureaus, so keeping your cell phone payments current can help to improve your credit score.
How To Improve Your Credit Score With Your Cell Phone Bill
The problem for some is getting all that data on there in the first place. You need creditors such as banks, mortgage companies, credit unions, and credit card issuers to send the credit reporting agencies information about your activity. But if you don’t have many of those accounts on your reports, you may face the Catch-22 of not qualifying for credit because you don’t have much credit. Now you can add in a type of account that previously had not been part of the equation: your cell phone.
By registering withExperian Boost, you can build your credit history by having your cell phone account listed on your credit report. Once you add the account, your on-time payments will be factored into your FICO score. Late payments, which can drop a credit score fast, won’t be included as long as the account doesn’t go so delinquent that you default and the debt is sent to a collection agency. And that’s not all. You can even add utility accounts, such as your gas and electric bills, as well as other telecom bills, such as cable or satellite, to Experian Boost. Those payments will then also be factored into your credit score.
Can Late Phone And Utility Bill Payments Affect Credit
Now the flipside: Getting behind on payments can lower your credit score even if your bills arenât being reported regularlyâwhether that reporting is done by companies themselves or through self-reporting.
Depending on how far behind you fall, you could incur penalties or late charges, and your account could be turned over to a collections agency. If itâs reported to the credit bureaus, collections activity can stay on your credit report for seven years, sometimes longer, according to the CFPB.
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Why You Wont Automatically Build Credit From Paying Phone Bills
As a rule, your payments on your phone bills wont affect your credit score. This is because cell phone providers dont typically report your payments to the credit bureaus, which means they dont show up on your credit reports.
Cell Phone Providers Will Check Your Credit History
The first thing to keep in mind is that cell phone companies will always check your credit history before approving your application for finance. This is because youre essentially taking out a loan with the provider, and as such, theyll want to be confident that youre not a credit risk and can keep up with your repayments. This means theyll run a credit check on your profile to ascertain your eligibility, and much like with all other hard inquiries, therell be a temporary dip to your credit score as a result. However, the effect on your overall profile should be negligible, and the inquiry will fall off your report after two years. That’s about the length of time you’ll have a smartphone handset, however.
Yet this also means that your credit score needs to be high enough in order to be approved for cell phone finance each provider will have different criteria so theres no set minimum score, though if youve got bad credit youll find it harder to be accepted. And if youre refused credit altogether, this can also show up on your report. If you think your score could do with being taken up a notch or two, it could be worth checking out the best credit repair services before you apply for your new contract.
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Start Working On Your Credit Today
Creating an excellent credit history isn’t difficult, but it does require consistency and time. With the right plan, you can build or rebuild your credit rating so you can feel confident in applying for financing.
You’ll have more freedom to purchase the things you couldn’t before, like a vehicle, a home, or the new smartphone that’s on your list.
But it all starts with you. And the best time to start is today!
House of Debt. “How To Get Approved For A Cell Phone With Bad Credit?”.
Credit Karma. “Mobile loans: How to apply for a loan using your smartphone”.
Nerdwallet. “4 Ways to Get a Cell Phone Plan With No Credit Check”.
About the author
Saphia Lanier is a content writer with 14 years of experience writing on topics relating to SaaS, marketing, SMBs, and business/personal finance. See Saphia on .
How A Credit Score Is Calculated
Its impossible to know exactly how much your credit score will change based on the actions you take. Credit bureaus and lenders dont share the actual formulas they use to calculate credit scores.
Factors that may affect your credit score include:
- how long youve had credit
- how long each credit has been in your report
- if you carry a balance on your credit cards
- if you regularly miss payments
- the amount of your outstanding debts
- being close to, at or above your credit limit
- the number of recent credit applications
- the type of credit youre using
- if your debts have been sent to a collection agency
- any record of insolvency or bankruptcy
Lenders set their own guidelines on the minimum credit score you need for them to lend you money.
If you have a good credit score, you may be able to negotiate lower interest rates. However, when you order your credit score, it may be different from the score produced for a lender. This is because a lender may give more weight to certain information when calculating your credit score.
Derogatory Cell Phone Service Accounts
If you don’t pay your cell phone bill, then your service provider may report it to the credit bureaus as a past due debt. When you fall behind on your payments, service providers become creditors because they’ve provided you with a service that has some financial value and you’ve failed to pay off that debt. As with other types of bad debts, a past due cellphone account can remain on your credit report for up to seven years. Needless to say, past due debts have a much more damaging effect on your score than hard inquiries.
Warning: Alternative Data Isnt Always Helpful
But be careful. Adding more information to your credit profile can help. But it can also work against you.
For example, a credit score that takes into account alternative data, such as your bank account information, could potentially rate you more negatively if you have limited funds in your account or have recently had a lot of big expenses.
Similarly, just as a missed payment on your credit card can hurt you, so can a late electricity payment or a lapsed phone bill.
Before you share more information about yourself and your financial history, think carefully about whether you really want to show that much information to lenders.
If you prefer to have more control over your information, you can also choose to only work with self-reporting services, such as Experian Boost or a rent reporting service, that let you choose exactly what gets reported.
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Hard Inquiries Versus Soft Inquiries
How the check will impact your credit also depends on the type of check the carrier performs.
Inquiries come in two varieties: hard or soft.
In most cases, hard inquiries are used when a company is trying to make a lending decision–such as extending you a shiny new smartphone without an upfront deposit.
Soft inquiries are typically used for things like background checks, routine checks from banks, checking your own credit score or for pre-approved offers from businesses. They often happen without your explicit permission. However, they also dont appear on your credit report or impact your credit score.
In most areas, running a hard inquiry requires your permission. This is because the inquiry will impact your credit score.
Credit Karma has a great guide on the finer differences between soft and hard credit checks to help assess the risks and outline examples of common inquiry scenarios.
If you’re curious what’s in your credit report, most credit bureaus offer at least one free report per year. Options include:
Will Missed Payments On My Cell Phone Bills Hurt My Credit Score
Generally speaking, missing a payment of any kind has the potential to harm your credit score, either directly or indirectly.
Any time you fail to make an on-time payment, you risk having your debt sent to collections. Late payments and delinquent accounts will both appear on your credit report and harm your credit score.
This holds true for cell phone bills as well.
If you skip paying your cell phone bill for a month or two and then catch up, the late payments will be reflected on your credit report. Since your payment history accounts for 35% of your overall credit score, itâs crucial to make on-time payments to keep your score healthy.
While an occasional late payment here or there isnât likely to cause severe damage, an ongoing trend of late payments will be detrimental to your credit score.
If you neglect to pay your phone bill for a prolonged period, your mobile provider may send your account to collections. At this point, the account will appear on your credit report as delinquent.
Delinquencies are very damaging to your credit profile. When an account is sent to collections, it will remain on your credit report for six years from the date of your final payment. This can act as a red flag when you try applying for financial products from other lenders.
With this in mind, always make your payments on time to avoid having accounts sent to collections.
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What Should You Do Differently
Your lifestyle can stay pretty much the same, even after your credit score goes up. You should continue to prioritize paying bills in full and on time, for example.
And having a better score doesn’t mean you should start recklessly borrowing money. “There’s no question that just because somebody will lend you money doesn’t mean you should take it,”says Matt Schulz, chief industry analyst at CompareCards.
“You are the best judge of your ability to take on a new loan,” he adds. “It’s important that people have a good feel for their own financial situation before they say yes. Taking a loan or a credit card that you don’t think you can handle is a recipe for trouble.”
Why Are Credit Bureau Credit Scores Different
When you check your credit score on TransUnion and Equifax, you may be surprised to see that the scores are different.
This discrepancy is due to many factors:
- Some lenders report to one credit bureau, while others report to both. This means a credit bureau may not have all your credit history, resulting in a different score
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Sign Up For A Family Plan
Joining a family plan is another way you can get a cell phone with no credit. The majority of carriers offer family plans that allow a primary account holder to add extra lines to their account. While the primary account holder will be subject to a credit check, additional line holders typically arenât subject to these same conditions.
Family plan account holders are the ones held responsible for payments, so itâs important to make payments on time. Otherwise, you could jeopardize both the cell phone and the credit of the account holder.
Learn Why Paying Phone And Utility Bills On Time Is Important To Your Financial Wellbeing
You may know that credit scores are calculated based largely on your past experience with things like loans and credit cards. But according to the Consumer Financial Protection Bureau , paying bills on time for utilities and cellphones could also be a factor.
Those types of bills are whatâs known as alternative data. Rent payments are another example. But alternative data has to be reported to credit bureaus for it to affect your credit. And you have to be responsible in other parts of your financial life, too. Keep reading to learn more about how paying bills could help you build your credit.
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Making Every Bill Payment Count
For consumers who already have excellent credit, Experian Boost isnt really necessary. For everyone else, the service could lead to a better credit score with at least one reporting agency and potentially open up opportunities to qualify for the top credit cards.
With any luck, the service will take off and the other credit reporting agencies will follow suit, eventually giving everyone the opportunity to raise their credit with the bills theyre paying each month.
Your Options Will Vary Depending On What You Want To Report
There are a number of services available that allow you to proactively add information to your reports or self-report your data to a lender.
They all work slightly differently and use different information to bulk up your financial profile. Experian Boost, for example, zeroes in on your cable, phone and utility payments. UltraFICO pulls an even wider variety of information from your account, including your cash flow, spending habits and account history.
Meanwhile, rent reporting services, such as Rent Reporters and Rental Kharma, will relay your on-time rent payments on your behalf.
Alternatively, you can work directly with a lender that uses alternative data and link your bank accounts so they can assess your transaction history. Or, you can use a nontraditional score service, such as PRBC, and ask a lender to consider it.
Depending on your goals and financial history, you could even use multiple alternative data reporting services to showcase your financial history.
If youre confident that giving lenders a more comprehensive view of your financial situation will help give you an edge, rounding out your financial profile with alternative data could be really useful especially if your credit history is thin or nonexistent.
Tip: In general, you cant remove accurate negative items from your credit report. And theyll stay there for up to seven years. But in some cases, black marks such as missed payments can be removed by contacting your creditors.
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Paying My Cell Phone Bill On Time Helps My Credit Right
It seems reasonable that if contracts require a credit check, timely payments should help your credit score right?
This isnt always true.
At the time of writing, prompt payment of your cellphone bill doesnt show up on Canadian credit reports. However, the overall price of your contract might.
If the carrier uses a third-party to offer device financing, that might show up as well–but that depends on the terms of the financing agreement.
However, regardless of where you live, late payments on your mobile bills or defaulting on your contract is sure to hit your credit score.
Pros And Cons Of Prepaid Phones
Choosing to go with a prepaid phone is sometimes the only way to afford a modern smartphone plan. But is it worth it?
- There’s no cell phone contract
- Pay as you go
- Own your phone outright
- No credit check
- More smartphones to choose from
- There’s no financing, so you’ll have to pay upfront for your phone
- The wireless range may not be as great
- The upfront cost is higher for newer phones
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What Type Of Information You Can Report To Credit Bureaus
Can pay the rent build credit? Yes. Rent is something that is usually not taken into account when updating your credit report, which is unusual because for many it can be the biggest monthly expense. Equifax, Experian, and TransUnion are willing to include rent payments in your credit reports if you report them. With that being said, not all credit scoring systems, such as FICO and VantageScore, take rental payments into consideration. For example:
- Newer versions of FICO do take rent payments into account
- When reporting rent to credit bureaus, the most used versions of FICO dont consider rent payments
- VantageScore does calculate rent payments as well
When choosing a rent-reporting service, there are a few aspects that you need to keep in mind, such as:
Does your property manager already use a service for reporting rent to credit bureaus? If so, it will save you a lot of time and money.
- Which credit bureaus do the service report to?
- Will you have free access to credit scores such as FICO or VantageScore?
- Are the overall costs within your budget?
- When can you expect the information to appear on your credit report?
- How are cases where your lease is disputed/broken handled?
|DID YOU KNOW: A persons payment history makes up the biggest part of the credit score, so taking preventative measures such as paying bills in a timely manner is the easiest way to improve your credit score.|