We pay a lot of bills every month. While some of these help our credit scores, there are others that do not help our credit scores, even when paid on time. Monthly payments for mobile phones fall into the second category.
Why timely cellphone payments don’t help your credit score
Cell phone providers do not report regular payments to credit bureaus even though they check your credit score to decide whether to approve your phone contract or plan for a new phone.
This means that no matter how many times you pay by mobile phone on time, it will not help your credit score since payments are not reported to credit bureaus. It seems a little unfair that your credit is being used to make a financial commitment that can’t help you.
Mobile service providers will also check your credit if you want to fund a new mobile phone. Many mobile operators now require you to buy or rent a new mobile phone. In any case, you will probably end up with a plan for a new phone with a small monthly payment included with a monthly service charge. When you get a new phone, the carrier will perform a credit check to determine if you qualify for funding and on what terms. While essentially extending the loan to pay for a new phone, payments will not be reported to the credit bureaus and will not help you evaluate the loan.
New mobile applications and late payments can hurt your score
Credit inquiries when you set up a new service or fund your mobile phone can affect your credit, although payments do not. Credit inquiries are 10% of your credit score and only affect your credit for 12 months.
After 24 months, inquiries completely suffer from your credit report.
While timely payments by mobile phone do not help your credit score, delays can. Just one or two late payments will usually not hurt your credit, as long as you have paid up to date before your contract is terminated and your former holder converts your account to collections.
If you stop paying for your cell phone and your account closes later, the mobile phone carrier can send your account to the billing agency for payment. The collection will be listed in your credit report and will seriously hurt your credit score. You can also hurt your credit score if you terminate your contract prematurely or shut down your services without paying the termination fee or balance on your phone in full.
When a faulty cellphone balance is on your credit report, it will remain there for seven years like most other negative credit information. Your credit score will have the biggest hit in the first few years after delinquency is added to your credit score, but your credit score may skyrocket over time if you make all your other credit-related payments on time and avoid future collections.
Although timely payments by mobile phone do not help your credit score, credit card payments are paid. If you have an open credit card, you can use it to pay for your mobile phone, then turn around and pay for your credit card. Making timely payments on your credit card will help you maximize your credit score. Some credit cards even provide security to protect your mobile phone if you pay the bill with your credit card. Check the terms of the credit card rewards program to see if this is the case for your credit card.