Can a Cell Phone Build Credit?

Cell phones are an irony in the world of credit: it takes good credit to get one, but paying your bill every month does nothing to build credit under the traditional model. As a response to the needs of many who pay bills on time, alternative credit-scoring companies allow people to self-report common utilities, like cell phone bills. Very few lenders, however, accept alternative credit scores.

Identification

As of 2010, the FICO scoring model used by the major credit reporting bureaus does not factor in cell phone payments, because most states have privacy laws preventing utility companies from sharing customer information. Also, monthly bills, such as for cell phones and rent, are not a true line of credit and the utility providers do not have a reliable way of reporting payment data.

Alternative Reports

The alternative credit reporting agency PRBC, formerly known as Pay Rent, Build Credit, allows customers to sign up for the service and self-report cell phone payments. The PRBC score may not help the creditworthiness of borrowers much, because only 800 lenders accepted this score as of 2010, according to Payments Source. Also, the FICO Expansion model factors in nontraditional payments and recurring bills. The Expansion score was released in 2007, but it may take some time before lenders consider it a good risk analysis model.

Potential

The major credit bureaus will probably eventually collect cell phone bill payments and other nontraditional information and incorporate it into the standard FICO model. In 2010, for example, Experian acquired RentBureau, the largest reporter of rental history in the U.S., and started listing that information on credit reports. The credit industry as a whole recognizes the profits to be had on the 50 million people who have no credit history but may pay bills like their cell phone on time, according to the Payments Source website.

Tip

People who do not qualify for a credit often use a secured card to build credit. Secured cards have a limit equal to the amount of money you put down on it and are very easy to acquire. Issuers of secured cards report to credit bureaus and might approve you for an unsecured line after a year or so of good payment history. You could build credit history by paying your cell phone bill with a secured line.