Does Having a Cell Phone Build Credit?

Many individuals wonder if consistently paying their monthly cell phone bill can help build their credit history. Generally, regular, on-time cell phone payments do not directly contribute to building a positive credit score in the traditional sense. This is because cell phone providers typically do not report positive payment activity to the major credit bureaus.

Understanding Credit Reporting

Credit reporting records an individual’s financial behaviors related to borrowing and repayment. Three major credit bureaus—Equifax, Experian, and TransUnion—collect and maintain this information. Lenders, insurers, and other entities use these credit reports to assess financial risk and determine creditworthiness.

Credit scores, such as the FICO Score, are numerical summaries derived from credit reports. These scores are primarily influenced by five factors: payment history (approximately 35%), amounts owed (around 30%), length of credit history (about 15%), new credit (about 10%), and credit mix (around 10%). Accounts appearing on credit reports include revolving accounts like credit cards and installment accounts such as mortgages, auto loans, student loans, and personal loans. On-time payments on these accounts are crucial for establishing and maintaining a favorable credit score.

Cell Phone Bills and Your Credit

Unlike traditional credit accounts, regular on-time payments for cell phone services generally do not appear on credit reports. Cell phone providers are typically not lenders and usually do not report positive payment data to the credit bureaus.

While positive payment history often goes unreported, a failure to pay can have negative consequences. If a cell phone bill becomes severely delinquent, typically after multiple missed payments, the account may be sent to a collection agency. Once sent to collections, this negative information can be reported to credit bureaus and will appear on your credit report, significantly harming your credit score. Collection accounts can remain on a credit report for up to seven years from the original delinquency date, even if the debt is paid.

Indirect Credit Impacts and Alternative Reporting

While routine cell phone payments do not build credit, missed payments leading to collections can severely damage a credit score. This negative impact can occur even if on-time payments were never reported. Debt collection entries on a credit report signal increased risk to potential lenders and can remain for a significant period.

Alternative reporting services help consumers leverage on-time bill payments. Services like Experian Boost allow individuals to include recurring payments, such as cell phone, utility, and streaming service bills, in their Experian credit report. By linking bank accounts, these services identify eligible on-time payments, potentially increasing the Experian FICO Score. While these services can be beneficial, particularly for those with limited credit history, they typically only impact reports with the specific bureau offering the service, such as Experian, and may not affect scores used by all lenders. Other third-party services, such as eCredable, also report utility and cell phone payments to credit bureaus like TransUnion, providing another avenue for these payments to positively influence a credit profile.