Is a Cell Phone Plan a New Line of Credit?

You cannot get a cell phone contract with most providers unless you have good credit, but this does not mean that credit reporting agencies view cell phones as a line of credit. Cell phones can affect credit, but almost always only for negative reasons. On the plus side, because cell phone plans are not a line of credit, they do not affect your debt load in the eyes of lenders.

Identification

The big three credit reporting bureaus in the U.S. do not receive data on cell phone bills from most carriers, nor could they because of state privacy laws regarding sharing information on utilities. Thus cell phone contracts are not considered a new line of credit. Cell phone providers, however, can run a credit check on applicants. This credit check will generate a "hard" pull with the credit bureaus and ding your score a few points like an application for a credit card or mortgage would.

Building Credit with a Cell Phone

Some companies specialize in reporting information about payments ignored by the major credit bureaus, such as cell phone plans. One of the major alternative reporting agencies is PRBC (Pay Rent, Build Credit). The problem with alternative credit reports is that very few lenders accept them and the agencies usually charge consumers for this service. Thus, cell phones are impractical if you want to use them to diversify your debt holdings or build credit.

How Cell Phones Could Affect Credit

Stop paying your bill long enough and the cell phone company could send your account to a collections agency or obtain a judgment in civil court. Any type of public judgment will do major damage to your credit score. Some cell phone companies, such as Verizon, are starting to report payment history to the credit bureaus to help customers build credit and to motivate more customers to pay on time.

Tip

If you hope to use a cell phone to build credit, you should ask the cell phone provider if the company reports to any of the credit bureaus. Otherwise, you might benefit from a carrier that does not report to the bureaus in case you miss a few payments. The application for a cell phone, however, entails much of the same process as underwriting in the lending industry. The provider will want to see a stable job history, low balances and no negative information. You could qualify for a cell phone with bad credit, but it may mean you have to pay hundreds of dollars on the security deposit.