Some of your payments are recorded to credit agencies, while others are not. Payments on credit cards, mortgages, and other loans, for example, are reported monthly, so making on-time payments might help increase or preserve your credit score.
Utility bill payments, including cable TV and mobile or landline phone service, are often not reported until they become substantially late and are sent to collections—a move that may have a significant negative impact on your credit score.
- Cable television, phone, and other utility expenses are often not reported to credit agencies or reflected in your credit score.
- However, if you are really late on your cable account, it may appear on your credit record.
- If you want to demonstrate that you pay your bills on time, you may request that your utility payments be included in your credit report.
Exceptions to the Rule
However, there are a few outliers. FICO, the corporation behind the most frequently used credit scoring models, provides one score, the FICO XD 2, that considers unconventional data such as utility payments. The idea is to generate credit ratings for clients who may not have enough information in their records to allow prospective lenders to evaluate their creditworthiness.
By registering in the Experian Boost program and granting the firm access to their energy and telecom bill payment histories, consumers may have their utility bill payments recorded in their credit reports at Experian, one of the three main national credit agencies. A person could do this if they don’t have enough other accounts on their credit reports and are seeking to develop a strong credit score by demonstrating that they pay their payments on time.
What’s a Payment Worth?
The single most essential aspect in your credit score is your payment history. A baseline FICO score, for example, consists of:
- Payment history (35%)
- Credit utilization (30%)
- Account age (15%)
- Inquiries/new accounts (10%)
- Credit mix (10%)1
The VantageScore, a credit scoring model created as an alternative to FICO by the three main credit reporting agencies, is based on similar criteria:
- Payment history
- Age and type of credit
- Credit utilization
- Size of balances
- Inquiries/new accounts
- Amount of available credit
VantageScore is vague about the specific weight it gives to each area. It does, however, leave little question about the significance of paying bills on time. The sole criteria that the VantageScore considers to be “very relevant” is a consumer’s payment history.
Late Payments and Your Credit
All creditors want to know that a borrower will make timely payments on his or her obligation. They utilize credit reports and scores backwards to determine how much of a danger a customer is likely to pose. If a person has a history of paying their debts on time, they are seen as a responsible credit user who is unlikely to cause the creditor any financial losses. Late payments, on the other hand, indicate dependability, financial instability, and increased financial risk.
As the account grows more overdue, the implications of late payments become more severe. Payment history with degrees of lateness is included on the consumer’s credit report: on-time, 30 days late, 60 days late, 90 days late, and 120 days late. Each degree of tardiness lowers the credit score slightly more than the preceding one.
Collection, repossession, charge-offs, bankruptcy, and other notations that indicate a failure to meet a financial commitment may also be recorded, and they have a bigger impact on the consumer’s credit score than late payments.
As previously stated, unless a cable or other utility bill is substantially late and in collections, it will normally not be disclosed at all. This normally occurs at the 90-day mark after a missed payment. Prior to that, the customer is likely to face late fees and, eventually, service suspension.
The longer you go without paying a bill, the worse your credit score will suffer.
How Long Do Late Payments Hurt?
Credit reports include the payment history for all accounts (open and closed) that they cover, but the effect of any one late payment on your credit score will fade with time. Recent and numerous late payments will have a greater negative impact on your credit score than a single late payment that has gone from memory.
According to VantageScore, the consumer’s credit score suffers the most harm in the first month after the late payment is notified. The influence then fades over around two years, after which it has little effect (although the late payment remains on the consumer’s file for seven years). If you’ve had numerous recent late payments on your credit report, one of the top credit repair agencies may be able to fix the harm.
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