Some of the bills you pay are reported to credit bureaus and others are not. Your payments on credit cards, mortgages, and other loans, for example, are reported each month, so paying them on time can help boost, or maintain, your credit score.
Utility bill payments, including those for cable TV and cell or landline phone service, generally are not reported unless they become seriously delinquent and are sent to collections—a move that can have a serious negative effect on your credit score.
- Cable TV, phone, and other utility bills usually aren't reported to credit bureaus or reflected in your credit score.
- However, if you are seriously delinquent in paying your cable bill, that may show up on your credit report.
- You can ask to have your utility payments included in your credit report if you want to show you pay your bills on time.
Exceptions to the Rule
There are, however, a couple of exceptions. FICO, the company behind the most widely used credit scoring models, offers one score, called the FICO XD 2, that takes into account certain nontraditional data, such as utility payments. The goal is to create credit scores for consumers who might not otherwise have enough data in their records, so that potential lenders can assess their creditworthiness.
Consumers can also choose to have their utility bill payments reflected in their credit reports at Experian, one of the three major national credit bureaus, by enrolling in the Experian Boost program and allowing the company to access their utility and telecom bill payment history. A person might want to do that, for example, if they don't have enough other accounts in their credit reports and are trying to build a solid credit score by showing they pay their bills on time.
What’s a Payment Worth?
Payment history is the single most important factor in your credit score. A basic FICO score, for example, is made up of:
- Payment history (35%)
- Credit utilization (30%)
- Account age (15%)
- Inquiries/new accounts (10%)
- Credit mix (10%)
The VantageScore, a credit scoring model developed by the three major credit reporting agencies as an alternative to FICO, 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 opaque when it comes to the exact weight it assigns to each category. But it leaves no doubt about the importance of paying bills on time. A consumer’s payment history is the only factor the VantageScore ranks as “extremely influential.”
Late Payments and Your Credit
All creditors want to know that a borrower will pay his or her debt as agreed. They use credit reports and scores in a backwards-looking fashion to assess how much of a risk a consumer is likely to pose. If a person has established a pattern of paying their bills on time, they are viewed as a responsible user of credit and not likely to cause the creditor any financial losses. Having a history of late payments, on the other hand, signals unreliability, financial instability, and greater financial risk.
The consequences of late payments escalate in severity as the account becomes more and more delinquent. The consumer’s credit report shows payment history with degrees of lateness: on-time, 30 days late, 60 days late, 90 days late, 120 days late. Each degree of lateness causes incrementally greater damage to the credit score than the previous one.
Collection, repossession, charge-offs, bankruptcy, and other notations that signify a failure to fulfill a financial obligation may also be listed, and they result in an even greater blow to the consumer’s score than late payments.
As mentioned earlier, a cable or other utility bill will generally not be reported at all unless it is seriously delinquent and in collections. That usually happens around the 90-day mark after a missed payment. Before that, the consumer is likely to be hit with late fees and ultimately a suspension of service.
The longer you fail to pay a bill, the more damage it can do to your credit score.
How Long Do Late Payments Hurt?
Credit reports reveal the payment history on all the accounts (open or closed) that they cover, but the impact of any particular late payment on your credit score will diminish over time. Recent and multiple late payments will do more damage to your score than a single late payment that has faded from memory.
VantageScore further explains that the greatest damage comes to the consumer’s credit score in the first month after the late payment is reported. Then its impact diminishes over about two years, after which it ceases to have much effect (although the late payment stays in the consumer’s file for seven years). If you're struggling with several recent late payments on your credit report, one of the best credit repair companies might be able to undo the damage to your credit score.