Utility and cell phone bills don't improve your credit score.

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Utility and cell phone bills do not improve your credit score.
2 years ago
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Did you know that items like utility bills, cell phone bills and checking accounts are generally not reported to the credit bureaus until they have become delinquent? Many people are under the false impression that paying their monthly utility bills and cell phone bills on time every month will result in a higher credit score, but this is not the case. So while paying your cell phone bill on time every month is certainly a good idea, doing so will not raise your credit score.

With so much at stake it is important for consumers to understand the factors that play a role in determining their credit scores. Just as importantly, it is vital to understand which factors have little or no role to play in determining an individual's credit score. By understanding which kinds of actions play the biggest role in determining credit score, each individual can focus his or her attention on the areas that have the biggest impact.

But while paying those bills on time will not result in a higher credit score, missing a payment or paying late may result in a lower score. That is because creditors will generally report their delinquent accounts to the credit bureaus, and those negative entries could lower your credit score and damage your credit. If you have ever been late on a payment to your local utility company or cell phone provider you may want to order a copy of your credit report to determine whether or not those late payments have damaged your creditworthiness in the eyes of potential lenders.

In fact it may be a good idea to check your credit report with each of the credit reporting agencies, since each company uses its own set of guidelines to determine which information is reported when accounts become delinquent. In general it makes sense to report only those accounts that are 90 days overdue or more, and many companies follow that guideline.

The size of the debt can also play a role in whether or not it is reported to the credit bureaus. . For instance, Equifax will accept reports of debts as little as $50, but many companies are reluctant to complete the extensive paperwork required to report on such a small bill. In fact the time spent submitting these small amounts can easily be worth more than the debt itself. For this reason many companies choose not to report small dollar delinquent accounts to the credit bureaus.

Consumers also need to understand that payment history is just one of the factors that ultimately determine an individual's credit score. For instance, a consumer's payment history makes up only 35% of the FICO credit score determination, and only 32% of the Vantage credit score. The rest of the score is determined by additional factors, including the number of credit inquiries on the account, the amount of outstanding credit, the amount of outstanding credit and the amounts of any outstanding loan balances. So while a clean payment history and the absence of overdue bills is certainly important, payment history is by no means the only factor used to determine the final credit score.

These days it seems everyone is paying closer attention to their credit score, and it has never been more important to keep your credit history free of late payments, missed payments and other negative information. Keeping your credit score high is one of the best ways to get the loans you need to buy a car, buy a home and get the other things you need. A low credit score could cause you to be charged a higher interest rate, or even to be turned down altogether.

By Beconrad
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