Does Your Cell Phone Bill Impact Your Credit Score?

Not every bill you pay affects whether your credit score goes up or down. Learn what kind of impact your cell phone bill can have on your credit score.

When it comes to your credit score, no criteria is more important than your payment history. It’s also one of the more confusing criteria, because even though you’d think payment history would cover all your bills, most of them won’t help your credit score go up.

Just about everyone has a cell phone at this point, and if you’ve been diligently paying your cell phone bill every month, here’s what you need to know about how it can impact your credit score.

Does your cell phone bill impact your credit score?

It can, but only if you fail to pay your cell phone bill. In that case, your service provider can report your account as delinquent to the credit reporting agencies, which will likely damage your credit score. The provider could also send your account to collections, and collections accounts are bad news for your credit.

Unfortunately, the inverse isn’t true, as paying your bill on time won’t help you build your credit. This tends to be the case with monthly services and utilities bills. Because you’re not borrowing money and paying it back like you would be with a credit card bill or a loan, the payment history doesn’t factor in to your credit score.

The exception would be if you used a credit card to pay for your cell phone bill, and then paid off your credit card balance. That would build your payment history since you were using a credit card, but that would be the case with any purchase you put on your card.

There is some good news if you want your cell phone bill to impact your credit, though -- Experian is introducing a new service this year that will factor your cell phone and utilities bills into your credit score.

How Experian Boost works

Experian Boost is a free service that anyone can sign up for. Although it isn’t out yet, you can pre-register if you’re interested.

Once the service goes live, you can link your Experian account to the bank accounts you use to pay your cell phone and utilities bills. You then confirm the information you’re adding to your credit file, and Experian will automatically update your FICO® Score with them.

Missed payments won’t hurt your score, because Experian Boost doesn’t keep track of those. It will, however, remove accounts with unpaid bills for longer than three months, and that could take your score back to where it was before.

There are two ways Experian Boost could help consumers with their credit:

• If you currently don’t have a credit score because your credit file is too thin, Experian Boost could make you “scorable” once it factors in your new payment information.
• If your payment history isn’t good or you haven’t built a long history yet, then the addition of new payment information could improve your credit score.

Bear in mind that Experian is one of three credit reporting agencies, and a creditor could check your score with any one of them. While Experian Boost can raise your credit score with Experian, that won’t do you any good if a creditor pulls your Equifax or TransUnion score.

Other ways to improve your credit

The fact that Experian will be taking cell phone bills and other bill payments into consideration is a welcome change, and hopefully it catches on with the other credit reporting agencies.

Still, the most reliable and effective way to improve your credit is by using a credit card. Specifically, you need to:

• Use a credit card regularly (at least once every billing cycle).
• Make your payment by the due date. Ideally, you should pay the statement balance so that your card issuer can’t charge you interest.
• Avoid using too much of your available credit. Try not to use more than 20% to 30% of your available credit at any time.

If you haven’t been able to get a credit card because of your credit history, you could have better luck with secured credit cards.

Making every bill payment count

For consumers who already have excellent credit, Experian Boost isn’t 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 they’re paying each month.