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Your credit score is calculated using several factors found in your credit report, including payment history, credit utilization and credit history.
Payment history is the largest factor, making up 35 percent of your FICO Score. Credit card companies, mortgage lenders, auto lenders and more all report your payments to credit bureaus, building this record over time.
Unlike your mortgage or car payments, paying your cell phone bill regularly each month alone will not help increase your credit score. Typically, cellphone providers don’t report your payments to the bureaus—though newer services like Experian Boost can help you manually add it.
Unfortunately, it’s easier for your cellphone bill to negatively impact your credit because missed payments and new accounts do get reported to the credit bureaus.
Here’s all you need to know to make sure your cellphone account is helping you build credit.
Missing payments may hurt your score
Paying all of your bills consistently is key to a good credit score. While paying your cellphone bill won’t have any automatic impact on your credit score, missing payments or making late payments can cause your credit score to drop if your cellphone account becomes delinquent.
If you miss several payments, your account could be reported as delinquent or sent to collections by your cellphone provider, which will show up on your credit report and hurt your credit score. Negative information remains on your report for seven years, though it may have less effect over time if you build up a more positive history. Delinquency can also happen if you end your contract with your carrier early without paying off the balance. Even when you no longer have access to your service, you are still responsible for paying off what you owe.
If you’re having trouble keeping up with your cellphone bill, it may be time to change your plan or your carrier. Doing so could help you save money on your cellphone bill, making it more manageable to pay. Sometimes, cell phone carriers will even buy you out of your existing phone contract if you switch to their service.
Opening a new plan can affect your credit score
Your cellphone carrier will likely perform a credit check to determine your eligibility for financing and the terms of the plan. This credit check can cause a temporary hit to your score, though hard inquiries only make up a small part of your score calculation and fall off completely after 24 months. Even though your cellphone provider’s financing plan acts like a loan, it is not reported to credit bureaus and cannot improve your credit score like other loans may.
Improve your credit score using your cellphone bill
Even though your cellphone payment isn’t automatically included in your credit report, there are ways you can add your positive payment history.
You cannot directly self-report your financial activity to a credit bureau. Instead, third-party services report your payment activity to the three credit bureaus to be included in your credit report. These companies submit payment histories for your regular payments that aren’t generally included in credit reports, from cellphone bills to utility and rent payments, though they may charge fees.
Experian Boost allows you to add your cellphone account (and other regular payments) to your credit report. Your on-time payments are then factored into your credit score and your late payments are not included (though if you default on payments and your account is sent to collections, you’ll still take a hit).
Experian Boost is especially beneficial for consumers with little credit history who are looking for alternative methods to build credit. At any point, you also can remove accounts from reporting if you feel they are not helping your score.
Pay your cellphone bill with a credit card
Your cellphone provider may not report payments to the credit bureaus, but you can achieve recognition for your timely cellphone payments in a more roundabout way by paying with a credit card.
Charging your cellphone bill to your credit card, then paying off your card balance in full and on time each month will help you build a solid payment history, benefiting from your cellphone. And depending on the card you use, you may also earn rewards for cellphone payments or benefit from cellphone protection insurance.
The bottom line
Your credit score represents your creditworthiness, which lenders use to estimate whether you can responsibly handle debt. When you have a good credit score, it demonstrates that you can use and maintain borrowed funds without issue.
A good credit score can help you access funds to help you achieve your financial goals and open the door for lower interest rates and premium rewards cards. If you have a bad or limited credit history, consider taking advantage of programs that report your positive regular payments to the bureaus, then continue building good credit habits that can benefit you throughout your financial journey.