Do Cell Phone Bills Affect Your Credit?

Your credit report is a document that details your history with various forms of credit. Any time you incur a debt or pay a bill, even for your cell phone, this information can go on your credit report. If you fail to pay your cell phone bills on time or default on your phone agreement, this will negatively impact your credit report.

Credit Report

All consumers who use any form of credit have a credit report that details how that consumer has behaved in the past. Creditors use your credit report to determine your credit score, a number that shows the creditor how good a borrower you are. If you have a good credit report, with no late payments or past negatives, you'll have a strong credit score and will be more likely to get new credit. If you have a bad credit score, your chances are not as good.

Lots of Negative, Little Positive

When you enter into a cell phone contract or monthly plan, you enter into a debtor-creditor relationship with the cell phone company. Some cell phone companies report your monthly payment activity to the companies that maintain the credit report information, but others do not, according to Carrie Davis of SpendonLife.com. For those that don't report regular activity, the only time your cell phone payments get reported are when you are late paying a bill.

Credit Checks

Your cell phone plan may affect your credit score even before you get approved. Whenever you apply for cell phone plan, the cell phone company typically looks at your credit report to see how you've used credit in the past. Known as a credit inquiry, this inquiry gets recorded on your report and can lower your score. However, any negative impact is typically minimal and does not have a lasting effect.

Options

Some cell phone users may be better suited by using a prepaid or pay-as-you-go cell phone plan, especially if they have difficulty making monthly payments regularly. Using a pay-as-you-go card allows you to still have a cell phone but prevents the cell phone company from negatively affecting your credit report. However, pay-as-you-go plans typically charge more for cell phone use than monthly plans, so this option may not be good for you if you use your phone often.