Does Cell Phone Service Build Credit?

Cell phone plans aren't usually found on your credit report.

Cell phone plans aren't usually found on your credit report.

Cell phones and smart phones are so common today many people feel like they're almost physically dependent on them. When you get a phone, your phone provider usually looks at your credit score to determine if you're a good enough risk to qualify for one. Unfortunately, paying your cell phone bill doesn't mean your credit score will increase. In most cases, your cell phone payments don't have an effect on your credit score at all -- unless you can't pay.

Credit Scores

Lenders want to know that the people to whom they give credit will repay their debts one day. That's how the lenders make money. Credit bureaus are independent agencies that compile and maintain credit information on individuals, assigning them credit scores, and then selling the information as credit reports to lenders and individuals. To know who's a safe investment and who's a bad one, lenders look at your credit score. The score is based on how you've used credit in the past, such as whether you paid your bills on time and whether you routinely max out your credit cards.

Cell Phones and Scores

Although not all the credit bureaus use the same formula to come up with the number, they typically use several key factors to determine a score. These include paying bills on time, the average length of time you've had your loans, the types of loans you have, how much you owe, and how many new credit lines you have. Cell phones services do not count as lines of credit or loans -- and paying your cell phone bill on time won't raise your score because cell phone providers don't report that information to the credit bureaus.

Late Payments and Cell Phones

While you won't build your score by regularly paying your cell phone bill, not paying can lower your score. Lenders don't like it when a borrower misses a payment, and when you don't pay your cell phone bill, your cell phone company may notify the credit bureaus of a late payment. If you go so long without paying that your cell phone company has to hire a collections agency to collect payment, your score will definitely decrease because collections agencies always report collections actions to the credit bureaus.

Alternative Scores

Although you won't raise traditional credit scores if you continue to pay your cell phone bill, some alternate credit scores might. FICO, for example, has a "FICO Expansion" score that looks at whether you pay your non-credit bills on time, such as your utilities and even your cell phone. However, just because that score exists and just because paying your cell phone bill may raise it, that doesn't mean a lender has to look at it. Each lender decides what scores he uses to determine your credit risk, and if you've got a bad traditional credit score, it probably won't matter what your alternative scores are.


About the Author

Roger Thorne is an attorney who began freelance writing in 2003. He has written for publications ranging from "MotorHome" magazine to "Cruising World." Thorne specializes in writing for law firms, Web sites, and professionals. He has a Juris Doctor from the University of Kansas.

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