Almost everybody has a cell phone, which means almost everybody has a cell phone bill. You'd think that an everyday expense could help build credit. Paying your bills on time should help, right?
So the question is: does a phone bill build credit? The short answer is: it depends.
Unlike credit cards or loans, phone bills typically do not directly impact your credit score when you pay them on time.
Why not? Phone companies generally do not report your payment history to the major credit bureaus, Experian, Equifax, and TransUnion. Those companies compile credit reports and calculate credit scores.
How Do Late Bill Payments Affect Credit Scores?
Late bill payments, on the other hand, can have a negative impact on your credit score regardless. Whether it's your cell phone bill, utility bill, or any other regular payment, missed payments can negatively impact your credit report and credit scores.
These late payments can stay on your credit report for a long time, up to seven years, and might lower your credit score, making it harder to qualify for loans or credit cards in the future.
How Do I Make Sure I'm Reporting Bill Payments to the Credit Bureaus?
If you want to set yourself up for credit score success, you can look into services that report your on time payments (cell phone bills, utility bill payments, or rent or utility payments) to the three credit bureaus.
Some phone companies offer programs that report on-time payments, which can help you establish a positive credit history.
Does Paying Rent or Other Utility Bills Help Build Credit?
While traditionally rent and utility payments were not reported to credit bureaus, this is changing. More and more people are taking advantage of tools and services that report bills they already have to pay, helping them build their credit history. These tools can be helpful for you if your credit score isn't where you want it to be yet, or if your credit report shows a short credit history.
How Else Can I Build Credit?
Open a Secured Credit Card
A secured credit card is a valuable tool if you want to build or rebuild your credit, or have limited or no income. Unlike traditional credit cards, secured cards require a cash deposit as collateral to start things off, which typically becomes your credit limit.
Secured cards still report to credit bureaus, allowing you to build a credit history over time.
Explore Credit Builder Loans
A credit builder loan is specifically designed to build credit. These loans work by depositing a loan amount into a savings account or certificate of deposit (CD), and you make payments toward the loan.
Once you pay off the loan, you get the money back and your positive payment history is reported to the credit bureaus and shows up on credit reports. Positive payment history is an important factor that affects your credit score.
Why It's Important to Build Credit
Building credit is crucial for your financial health and future opportunities. A good credit score can make it easier to get a loan for major purchases like a car or home. It can also improve the interest rate on your loan and help you get approved to rent an apartment or buy a car.
If you want to build credit and work on your credit score, look into options like:
- A credit builder loan
- A secured credit card
- Services that report paying phone bills, utility bills, and rent to credit bureaus
There are also other things that you can take control of, like paying bills on time, keeping your credit utilization low if you have a credit card already, and monitoring your credit score often to know where you stand.
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Disclaimer: The information provided in this blog post is meant for informational purposes only and does not constitute financial advice.
