Do Cell Phone Payments Affect Your Credit Score?
Cell Phone Payments and Your Credit Score
In this article, I am going to discuss the relationship that exists between cell phone payments and your credit score. No one likes to do anything that they know will hurt their credit score. So, when it comes to payments of cell phone bills, many people want to know whether it will impact their credit score. Before I start discussing on whether cell phone payments affect credit score or not, it is good that we start from the rudiment.
Cell phone is fast becoming our companion in our day to day activities. Wherever you are going or whatever you plan to do, your dressing may not be complete without your cell phone with you. Even if you mistakenly forgot to take to cell phone with you, there is tendency that you may need to go back to take it if you suddenly remember that the phone is not with you. We use our cell phone to do virtually everything today. We don’t only use our cell phone to make and receive calls, we use it to send messages and mails, take pictures, and store important information such as your contacts details, calendars and appointments. We use it to set alarms as reminders for important meetings and events. We navigate through our cell phone to identify or direct us to a specific locations. We also conduct transactions via our cell phones. This is just to mention few of what we do with our phones. The list can continue to go on and on. The truth is that, you may never know how important your cell phone to you until you lose it. Just as they usually say that cow does not know the value of its tails until it is cut off. So, if our cell phones could be this important to us, it will be good that we educate ourselves if there is any way its use can affect our credit score.
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Applying for Cell Phone Service Contract
No cell phone service provider will just throw their phones at you. If you know that you need a cell phone, you will need to approach companies that are into this line of business. When you apply for cell phone service contract, the carrier will definitely carry out check on your credit. This will help them to be sure that you will be able to pay your bills regularly. This type of credit check is called hard inquiry. Does this affect your credit score? Yes, it does. Every time a hard inquiry is placed on your credit report, your credit score will drop a little. It is good for you to understand that credit inquiries make up to 10% of what determine your credit score. Because of the effects that hard inquiries may have on your credit score, it then makes sense not allow too much inquiries to be placed on your credit file. However, this does not mean you cannot shop around for best cell phone carrier. If you want to do this, you should ensure that you carry out your shopping within a very short space of time. Credit bureaus understand that people usually shop around in order for them to land the best deal. For this reason, they treat hard inquiries for the same type of transaction as a single transaction if the space between the inquiries are very short.
Another angle to your application for cell phone contract is that, the carrier may only approve the application if your credit score is good enough. If you have bad credit score, it may be difficult for you to get a carrier that will be ready to accept you. They believe that people with poor payment history may not be able to pay their bills on a regular basis.
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Cell Phone Payments Vs Credit Score
How does cell phone payments affect your credit score? The truth is that your cell phone payments may not affect your credit score in any way if you pay your cell phone bills on time. The reason is that, your cell phone payments are not normally reported to credit bureaus. Therefore, it is not part of the information that will be on your credit report. Cell phone contract is not actually a line of credit or loan. For tis reason, payment of your cell phone bills on time will not improve your credit score in any way. However, if you think that since prompt cell phone payments do not count in any way to the building of your credit score and you now decide to miss your payments, you may be jeopardizing your credit score. If you miss your cell phone payments and allow it to enter delinquency, the carrier may transfer the debt to collection. This will then be reported to the credit bureaus and this will hurt your credit score. Late payments can stay for seven years in your credit report. However, if you pay off the debt, the effect will soon disappear thereby bringing your credit score back to normal. Because of the bad effect that late payment usually has on payment history, you may want to plea with the collection agency to help you withdraw the late payment from your credit report. Instead of making late payment on your cell phone bills, you can use your credit card to make payment if you don’t have ready cash to make the payment. At least, this will allow you to buy time. Also, it is not compulsory that you should pay off your card balance at the end of the month. If you are able to make just the minimum payment on your credit card balance, you will still appear good in the eyes of the credit bureaus as long as you pay it promptly. This way, you will have a good payment history and this can improve your credit score. Nevertheless, you should know how to balance this as having high credit utilization ratio will ding your credit score too.
Cell Phone Contract Cancellation
The cancellation of your cell phone contract can come from either side; that is from you or from the carrier. If you fail to pay your cell phone bills, your service provider may cancel your contract. However, that does not mean you will not need to pay your outstanding bills. If you refuse to pay, the carrier will transfer the debt to the collection agency. Even though the cell phone carrier may not report you, the collection agency will report you to the credit bureaus. And I believe you already know the effects this will have on your credit score.
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On the other hand, you may be the one that initiates the cancellation of your cell phone contract. It may be that you are no longer satisfied with their service or you want to switch to a cheaper cell phone carrier. If you want to cancel your contract, it is important that you pay all your cell phone bills up to date. If you allow the cancellation to slip into a new month before it is effected, you may likely have incurred small amount which may seem negligible to you. That negligible amount may hurt your credit score if you refuse to pay it. I read of a person who lost mortgage of £220,000 due to a missed payment of just £7.91 on his cell phone bills. So, the effects of missed payments can be very painful. Some carriers do charge cell phone contract cancellation fee. You may need to find out how much is the fee so that you can include the it in your final payment. At times, the carrier may set high cell phone contract cancellation fee to discourage switching. This is one of those factors you may need to consider before signing up any contract no matter how cheap it appears.