Does a Cell Phone Bill Build Credit?

If you’re like almost anyone in the United States, you probably have a cell phone. We often get asked by our visitor whether paying a cell phone bill build credit? We will answer this question in much detail below.

Does a Cell Phone Bill Build Credit?

Generally, paying a cell phone or any type of phone bill will not help you build credit because cell phone providers do not report your account status to the credit reporting bureaus. Only accounts, such as credit cards, auto loans, home loans, student loans, and personal loans will help you build credit. That said, out of the three major credit reporting bureaus, Experian has created a program known as Experian Boost, which rewards consumers for making on-time payments on other bills that include cell phone bills.

Your payment history on accounts, such as credit cards and auto loans accounts for 35% of your credit score. The easiest way to build your credit is to make such payments in full and on time.

If you’re making your cell phone bill payments on time, you probably want them to help your credit, but the truth is that cell phone providers do not report to the credit reporting bureaus, as such, they will not increase nor will they decrease your credit score.

Not Paying a Cell Phone Bill Could Hurt Your Credit

That said, if you do not make your cell phone bill payment on time, you can hurt your credit score. Not paying your cell phone could hurt your credit in the event that you stop making payments on your account, and the unpaid debt is sent to a collection agency.

Once your unpaid cell phone debt is sold to a collection agency, the collection agency will then attempt to collect the debt from you. If you refuse to pay the outstanding amount, the collection agency may place a collection account on your credit report.

Collection accounts that are reported to the credit reporting bureaus (Equifax, Experian, and Transunion) can reduce your credit score by up to 100 points, causing significant damage to your credit score.

A collection account will remain on your credit report for 7 years and will continue to drag your credit score down until it’s removed from your credit report. After 7 years pass, the collection account will automatically be removed from your credit report.

So, although your cell phone bill and account status is not reported to the credit reporting bureaus and will not appear on your credit report, however, if you fail to make cell phone bill payments on time, you could still damage your credit.

Cell Phone Carrier Will Check Your Credit

Although cell phone carriers do not report your account status to the credit reporting bureaus, they will check your credit before opening an account for you or allowing you to finance a cell phone.

Financing a cell phone, like paying your cell phone bill, will not help you build credit because your account status and payment history are not reported to the major credit reporting bureaus. So, even though you’re financing a phone (taking out a loan to purchase a cell phone), your on-time payments will not help you build credit.

Usually, when you apply to finance a cell phone, a soft inquiry is added to your credit report. Soft inquiries do not hurt your credit score, so you don’t have to worry about the inquiry hurting your credit score.

That said, if you finance a phone and terminate your cell phone agreement prematurely, you will have to pay early termination fees. If you fail to pay these fees, your unpaid debt may be sold to a collection agency and the collection agency will then attempt to collect the debt from you, causing damage to your credit.

Experian Boost

If you make your cell phone bill payments on time and want your positive cell phone bill payment history to be reported to Experian, Experian offers a service known as Experian Boost, which allows consumers to build credit by allowing Experian to report their positive payment history on their Experian Credit Report.

With Experian Boost, only positive payment history is reported, so if you miss a payment on your account, the missed payment will not hurt your credit score.

Also, Experian Boost will only improve your Experian Credit Score, your other credit scores will not benefit from Experian Boost.

If you want to build your credit, there are some alternative to using Experian Boost. For example, almost everyone will qualify for a secured credit card.

With a secured credit, you’ll have to place a security deposit with the card issuer, and the card issuer will typically give you a credit limit that’s equivalent to the amount of security deposit you made.

Secured credit cards function the same way a regular unsecured credit card functions and will help you build your credit.

So, open a secured credit card, spend only as much as you can afford to pay at the end of each month, and make full and timely payments, and you’ll be on your way to building strong credit.

Why Should You Care About Building Your Credit?

Having good credit in the United States is essential because it impact your ability to do the following things:

  1. Financing a Car – Having a good credit score is essential for purchasing a car with affordable monthly payments. The higher your credit score, the lower the interest rate on your car loan. Also, having a good credit score is essential to be approved for an auto loan in the first place.

  2. Buying a Home – Your credit score plays a role in whether you’ll be approved for a home mortgage. The better your credit score, the better the odds that you’ll be approved for a home loan. Also, the better your credit score, the better the interest rate you’ll qualify for.

  3. Opening a credit card – Credit card issuer will only allow those who have a good credit score to open unsecured credit cards. If you have not built your credit, you will only qualify for a secured credit card, meaning you’ll have to make a security deposit, which will become your credit limit. So, having good credit is essential to opening credit cards with reasonable interest rates.

  4. Renting an apartment – Some landlords consider a potential tenant’s credit score prior to renting an apartment to them. This is so because persons with higher credit scores are more likely to make their rent payments on time. So, if you want your rent application to be approved, you should build good credit.

  5. Obtaining a personal loan – If you want to obtain a personal loan, you must have good credit. The better your credit score, the better your odds are for being approved for such a loan. Also, the better your credit score, the better the interest rate that you’ll qualify for.

  6. Saving money on car insurance – Insurance companies take into consideration a person’s credit score when setting their insurance premiums. Those who have a good credit score will qualify for better premiums because they’re seen as less risky. So, build your credit to qualify for less expensive insurance premiums.

  7. Opening utility accounts – Having a good credit score will allow you to open a utility account without having to pay a deposit. However, if you don’t have good credit, you may be rejected for a utility account, or if you’re approved, you’ll have to place a security deposit.

Credit Score Planet Frequently Asked Questions

1. Does paying a cell phone bill build credit?

No, generally paying a cell phone bill will not help you build credit. That said, Experian does offer consumers the ability to have their bills reported to Experian for a credit score boost. However, this credit boost will only help your Experian credit score.

2. What bills help build credit?

Credit card bills, auto loan payments, home loan payments, and student loan payments will help you build credit. Paying things, such as phone bills, cell phone bills, electricity bills, gym membership premiums, and water bills will not help you build credit because your payment history is not reported to the credit reporting bureaus.

3. Does financing a phone build credit?

In most cases, financing a cell phone will not help you build credit.

4. Does leasing a phone build credit?

In most cases, leasing a cell phone will not help you build credit.