Can One Late Phone Bill Affect Credit?

Consumers often falsely assume that utilities, such as cellphones, affect their credit rating like any other account. A late phone bill probably does not affect your credit rating. However, some cellphone companies try to motivate customers to pay on time by reporting accounts to the credit bureaus to affect customer credit ratings.

Identification

A late cellphone bill can affect your credit rating. Although phone bills rarely appear on a credit report because of privacy laws and the cost to the cellphone company, some phone companies report bills when they can. In 2006, for instance, Verizon started reporting account histories to the credit bureaus, according to Tech Dirt. Late payments on your credit history can take more than 110 points off your credit score for a 30-day late payment, and more than 140 points for a 90-day late payment, according to Les Christie of CNN. Payment history counts for 35 percent of a FICO credit score.

Collection Account

Your phone bill can affect your credit rating even if your service provider does not report to the credit reporting bureaus when the company sends your account to a collection agency. Collection agencies almost always report their accounts to the credit bureaus, and a single one can do more than 100 points of damage. If the creditor sues you over a bill, the civil judgment further erodes your credit rating. Late payments or a collection account stay on your credit report for seven years.

Considerations

Although a cellphone company can terminate your contract and send the bill to a collection agency after a single missed payment, it probably won't do this. Instead, it may impose a penalty on the balance due. Most phone companies won't terminate a contract after one missed payment but may declare the account noncollectable after it becomes six to eight months delinquent. A collection account or charge-off does even more damage to a credit rating. Because you never know how a cellphone company may react to a late bill, especially when you chronically pay late, you should pay your bill on-time every month.

Tip

Your cellphone company probably lets you suspend service indefinitely. While the cellphone company probably charges you a maintenance during service suspension and reactivation charge when you want to use the line again, this usually amounts to less than half of the bill. Also, trim unnecessary expenses, such as fast food, from your budget if you cannot afford your cellphone bill. You should also consider terminating your contract if you frequently miss payments to avoid the company sending your account to collections or reporting missed payments. You can still own a phone by using a prepaid cellphone service. Early terminations usually carry a several hundred dollar penalty, so prepare to pay this off or face a delinquent account.