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Does Paying Bills Build Your Credit?

Payments that don't go on your credit reports can't help your credit — but failing to pay may hurt it. Here's what to know, and some workarounds.
Jan. 8, 2020
Credit Score, Personal Finance
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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 goes on your credit reports.

That means gym memberships, your cable bill, your 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.   

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Here’s a look at whether recurring bills build credit, and some new ways to get them added to your credit profile.

Does paying a phone bill build credit?

Faithfully paying the phone company, month in and month out, doesn’t help you build credit because phone companies don’t typically report to credit bureaus. Even financing your phone or leasing it via a phone contract won’t build credit, since the companies don’t report the activity. 

You may see a small, temporary dip in your credit score, however, if the phone provider checks your credit before allowing you on a phone plan. 

There are some workarounds, however: 

3 ways to use your phone to build credit

  • If you take out a personal loan to buy a cell phone and use it for a “bring your own phone” plan, your loan would be reported as installment debt and on-time loan payments would be reported. The monthly phone charge would not, though.
  • Similarly, you can indirectly get credit for paying your phone bill by putting it on a credit card and paying that on time. Your credit report will show just the credit card and not your phone plan, but paying your credit card bill on time, every time is an essential element of good credit.
  • Some scores now have an option of including “alternative data,” such as phone and utility bills. Experian Boost, for example, is an opt-in program that uses positive data from phone and utility payment records once you give Experian access to the account you use to pay those bills. That can help raise your Experian FICO 8 scores (there are many other scores, but FICO 8 is widely used in credit decisions). The other two major credit bureaus, TransUnion and Equifax, haven’t introduced similar products. And while Experian’s algorithm raises most credit scores, it doesn’t raise all of them. If it lowers yours, you can opt out.

Does paying insurance build credit?

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. (The exceptions are California, Hawaii and Massachusetts.)

But 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.

However, if you put your auto insurance premiums on a credit card and pay that in a timely fashion, your insurance payments can indirectly help build credit. And having a car loan or lease can help you: Car payments are generally reported to the credit bureaus, so they do affect your credit. 

As with car insurance, paying for health insurance (or failing to pay) doesn’t affect your credit. 

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; 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 evaluated the same as any other. 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.

Medical credit cards do report to the credit bureaus. Likewise, medical loans are still loans and report to credit bureaus, so paying them on time will help build credit.

You do get one break on medical debt: It cannot be reported to the credit bureaus for 180 days, so you have time to work out a payment plan or for insurance to pay. Also, medical collections have to be deleted from your credit report if they are later paid by insurance.

Does paying cable or Internet bills help build credit?

When you sign up for cable or internet service, you may have to agree to a credit check. That can take a few points from your credit score if it’s a “hard inquiry” on your credit. But a good credit score may save you from having to pay a deposit or get you a lower one. 

Paying utility and cable bills on time won’t help your credit, though, because most utilities don’t report to the credit bureaus. As with other recurring bills, however, if you put them on a credit card and pay on time, that builds a good payment history and helps your score.

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 phone bills, cable and internet bills can help your score if you opt in to Experian Boost. Your TransUnion and Equifax credit reports will not 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 rent-to-own help build credit?

Most rent-to-own operations don’t report your payments to credit bureaus, and payments that aren’t reported can’t build your credit. In addition, rent-to-own contracts typically result in consumers paying much more for an item than it is worth.  

A different kind of renting can build your credit: Rental payments for a home or apartment can be reported to the credit bureaus and may help build some scores.

What does help you build credit?

If you’re hoping to plump up a thin credit file, there are options for adding credit lines without adding debt. 

Two options worth considering:

  • A small credit-builder loan, which releases the borrowed money to you once you pay the loan. 
  • A secured credit card 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.

Be sure you understand the fee structure of any credit before applying. You might also look for a credit product that can be obtained without a hard credit inquiry so that simply applying doesn’t reduce your credit score. 

In both cases, payments made on time and reported to the credit bureaus can help you build or rebuild credit, even if some of your regular bills aren’t contributing directly to your score.

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