Does Paying Bills Build Credit?
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Paying your mortgage, credit cards and loans on time will boost your score because they are reported to the three major credit bureaus.
But not every account you pay is reported to the bureaus, so good behavior like paying rent and utility bills on time typically won't help your score. However, failing to pay can really hurt if your account goes to collections.
To get credit for good financial behaviors that the credit scoring models will otherwise overlook, consider opt-in services that can elevate your score by reporting positive rent or utility payment history to one or more of the bureaus.
Your credit scores are calculated from the data on your credit reports, so you want your reports to show a solid record of on-time payments. But not every payment you make gets reported to the three major credit bureaus — Experian, Equifax and TransUnion — which means they don't appear on your credit reports.
That means monthly rent payments, utilities, internet and phone bills, health insurance premiums and more are unlikely to help you build credit even if you’ve paid faithfully for years. However, failing to pay them can damage your score if your account is sent to collections.
Here’s a look at whether recurring bills build credit, and how you might get them added to your credit profile.
Does paying a cell phone bill build credit?
Paying your cell phone bill each month doesn't help you build credit because cell phone providers don’t typically report payment activity to the credit bureaus. You may see a small, temporary dip in your credit score, however, if the cell phone provider checks your credit before selling you a phone or enrolling you in a plan.
Does paying car insurance build credit?
Paying your car insurance premiums on time typically won’t help you build credit. Because car insurance companies are not lending you money, they don't report your payments to credit bureaus. If you stop paying, they simply cancel your coverage.
In most states, car insurers are permitted to use information in your credit reports to help set insurance rates. In that way, having a bad score can result in paying more for auto insurance.
Does paying medical bills build credit?
Simply paying medical bills typically doesn't build credit, unless you put them on a credit card. Then, they’re like any other charge, and paying on time and keeping balances low can help your credit. However, credit cards should be used as a last resort because it’s often possible to find a less expensive way to pay or to negotiate a discount.
There are medical credit cards, designed to help make repaying medical costs more affordable, but they are still credit cards and should be similarly evaluated. Know the annual percentage rate, payment terms and any penalties that could accrue. Compare them with other types of credit cards, such as those offering 0% interest offers, to determine what's right for your circumstances.
Medical credit cards do report to the credit bureaus. And medical loans — unsecured personal loans used to pay for a wide range of medical expenses — report to the credit bureaus just like other types of loans, so paying them on time will help build credit.
Medical bills on credit reports
If you have medical debt and worry about its impact on your credit, there may be relief in sight. In June, the Consumer Financial Protection Bureau proposed a rule seeking to remove medical debt from credit reports, prevent credit reporting companies from sharing medical debt with lenders and bar lenders from using medical information in lending decisions. A final decision is expected in early 2025.
Does paying cable or internet bills help build credit?
Paying cable and internet bills on time won't help your credit because most utilities don't report to the credit bureaus. But, failure to pay can result in your account going to collections. Collections are reported to credit bureaus and can badly damage your score.
As with cell phone bills, cable and internet bills can help your score if you opt in to a service like Experian Boost that gives you credit for utility and other kinds of payments. Just be mindful that not all of your credit reports will be affected.
Does paying college tuition help build credit?
Paying tuition doesn't help your credit unless you take out a loan to pay it, then repay the money. Student loans, paid as agreed, will help build credit. But if you pay for tuition without financing it, your credit score won’t be affected.
Does paying rent build credit?
Rental payments sometimes are reported to the credit bureaus and that can help build some scores, especially if you are just starting out or have a thin credit file. There are a wide variety of rent reporting services on the market — some free, some provided by landlords and others at a cost to the renter — that can report on-time rental payments. The details for these services vary, so pay attention to the details to find one that’s right for you.
Before signing on, these questions might be helpful to ask:
Is your landlord or property manager required to verify your payments?
Which bureau(s) does the service report to?
How much does it cost per month or year?
How long does it take for rental payments to show up on your credit reports?
Can you easily cancel?
How to get credit for good financial habits
Some credit score models now accept alternative data, which is data that’s not typically part of a person’s credit report but can be included if they opt in to a specialized service and, sometimes, pay a monthly fee. Not every kind of bill can be added, but rental payments, internet and phone bills and other utilities typically qualify.
Experian Boost and ECredable are two examples of opt-in programs that use data from phone and utility payment records to grow your score. There are some notable distinctions between the two programs when it comes to cost, what kinds of payments are reported and which credit bureaus they reports to. The one thing they have in common: If participating lowers your score, you can opt out.
It’s also worth noting that most bills can be put on a credit card and then paid off in full each month. This is an indirect way to build a positive payment history and consolidate multiple due dates into one. But you might incur fees to pay by card, and you can get the same effect — making payments on time each month — with just your normal credit card usage.
Other ways to build credit
If you’re hoping to plump up a thin credit file, there are options for adding credit lines without adding debt:
Opening a new credit card that you use regularly for small expenses and pay in full every month.
Applying for a small credit-builder loan, which releases the borrowed money to you once you pay the loan. You'll get the double benefit of a record of on-time payments and a lump sum you can use to pad your emergency fund.
Adding a secured credit card to your wallet that reports to the credit bureaus. You can avoid adding debt and paying interest by paying charges online as quickly as they are posted — and still get the credit benefit.
Becoming an authorized user on the account of a trusted family member or friend with good credit and payment habits. You’ll benefit from their strong credit history without being on the hook for payments.
Be sure you understand the fee structure of any credit before applying. And be aware that your credit score might also get dinged when applying for a new loan or service where a credit check is required. A "hard inquiry" on your credit can drop it a few points, but the effect typically fades after several months.
If that worries you, you can look for a credit product that can be obtained without a hard credit inquiry so that simply applying doesn't reduce your credit score.
