Stephanie Halligan is a blogger at The Empowered Dollar. Her mission: saving teens and twenty-somethings from financial disaster, one conversation at a time.
Next to paying for a roof over your head and keeping the lights on, a cell phone bill (and the cell phone that comes with it) is probably at the top of your list as a “necessary” monthly expense.
Whether you just have a cell phone plan for yourself or you’re paying for the entire family, you’re probably one of the 82% of Americans paying for the privilege to talk, text and even surf the web from where ever you want, whenever you want.
But not all bills are created equal – especially when it comes to affecting your credit score. Unlike some monthly expenses, like your mortgage or a car payment, paying your cell phone bill can affect your credit in not-so-intuitive ways. The irony? You likely need good credit to get a cell phone in the first place, but depending on how you pay your cell phone bill, you could either be hurting or harming your credit (or not affecting it at all).
So when exactly does paying your cell phone bill affect your credit score?
Missing a Cell Phone Bill Payment: Hurts Your Credit Score
Like most bills, if you miss a payment or you’re extremely delinquent on settling your bill, you can damage your credit score. Some cell phone companies will switch off your service if you fall behind on your payments; but just because you no longer have a working cell phone, it doesn’t mean you’re off the hook for an outstanding cell phone bill.
In addition to shutting off your service, your cell phone company will likely report your missing payments to the credit bureaus and may turn your debt over to a collections agency – both of which will harm your credit score. And a delinquent account that’s made it to collections can linger on your credit report for up to seven years. The takeaway? Pay your bills on time – otherwise you may find yourself without a working cell phone and a lower credit score.
Paying a Cell Phone Bill on Time: Doesn’t Affect Your Credit Score
So if missing a cell phone bill payment could damage your credit score, paying your bill on time should improve your credit score, right? Not exactly. Unfortunately, if you’re simply paying your cell phone bill each month with cash, by check or by having it automatically deducted from your bank account, it’s not on impacting your credit score. Since the cell phone company hasn’t extended you a line of credit, your on-time payments aren’t on the credit bureaus’ radar.
However, there is one payment method that could actually boost your credit score…
Paying a Cell Phone Bill with a Secured Credit Card: Helps Your Credit Score
If you don’t want to charge your cell phone bill to a credit card (or you don’t have good enough credit to open a card), there is an alternative that will help you build your credit score. It’s called a secured credit card. Similar to a debit card, the amount you can charge to a secured credit card is limited to the amount of money you put down on the card. If you don’t qualify for a traditional credit card, don’t worry – it’s significantly easier to qualify for a secured credit card at a bank or credit union. And the issuer will report your secured credit card to the credit card bureaus, which means you’re building credit history by paying your cell phone bill.
Regardless of how you decide to pay your cell phone bill, remember to pay your bill on time and in full to avoid fees, charges and damage to your credit score.