Does Paying Subscriptions Build Credit?

A credit score serves as a numerical summary of an individual’s creditworthiness, playing a significant role in various financial aspects. This three-digit number, typically ranging from 300 to 850, helps lenders determine the likelihood of a borrower repaying their debts. A higher score generally indicates lower risk and can lead to better loan terms, housing opportunities, and even insurance rates. Many people question whether their regular subscription payments contribute to building this important financial indicator.

Understanding Credit Scores

A credit score evaluates a person’s ability to manage debt. It is based on credit reports, which detail an individual’s credit history. Key factors influencing a credit score include payment history, the amount of debt owed, the length of credit history, the types of credit used, and new credit applications. Payment history and amounts owed typically have the most significant impact.

Credit bureaus, such as Experian, Equifax, and TransUnion, collect this financial data and use scoring models to generate credit scores for lenders to assess risk. FICO and VantageScore are the most common scoring models.

Why Subscriptions Do Not Build Credit

Traditional subscription payments, such as those for streaming services, gym memberships, or digital content, do not build credit history. This is because these companies typically do not report payment activity to major credit bureaus. Unlike credit card companies or loan providers, subscription services are not considered traditional credit accounts.

Lenders report repayment behaviors for credit accounts to credit bureaus. Consistent reporting of on-time payments on credit cards, mortgages, and auto loans builds positive credit history. Without this reporting, even consistent subscription payments remain invisible to the credit scoring system. Paying these bills on time demonstrates financial responsibility, but it does not directly impact credit scores.

Alternative Payment Reporting Services

Some emerging services allow non-traditional payments to be reported to credit bureaus. Rent reporting services, for instance, can help individuals get credit for their on-time rental payments. These services typically involve property managers reporting payments or renters signing up independently, often for a fee. Reporting rent can be beneficial for those with limited credit history, as rent is often a significant monthly expense.

Utility payment reporting services also allow on-time payments for gas, electric, water, and phone bills to be included in credit reports. Experian Boost, for example, allows consumers to link bank accounts to include eligible on-time utility and telecom payments in their Experian credit report, potentially improving their FICO Score. While helpful, their impact may be limited compared to traditional credit accounts, and not all services report to all three major credit bureaus.

Strategies for Building Credit

Building positive credit involves using traditional financial products responsibly. A common starting point for individuals with limited or no credit history is a secured credit card. A refundable security deposit, typically $200 to $5,000, establishes the credit limit for a secured card. Card issuers report payment activity to credit bureaus, allowing on-time payments to build credit.

Another tool is a credit-builder loan, where the loan amount is held by the lender in a savings or certificate of deposit account and released after full repayment through monthly installments. These loans report consistent, on-time payments to credit bureaus, establishing positive payment history. Across all credit products, making payments on time is paramount, as payment history is the most significant factor. Maintaining low credit utilization, ideally below 30% of available credit, also positively impacts scores. A longer credit history and a mix of different credit types, such as installment loans and revolving credit, can further strengthen a credit profile.