Do you know the difference between a need and a want? There’s a pretty short list of things that are essential to our survival, headlined by food, shelter and clothing. However, many people nowadays would also include a mobile phone among their list of indispensable “must-have” items.
If You’re One of the Many
Assuming you’re one of the many, did you know that your monthly bill payment for your mobile phone has the potential to affect your credit score? It’s true. If you default on your payment, it can impact you negatively because the credit bureaus see it as a sign that you might be falling behind on your regular financial responsibilities.
For most of your other payments, including a car loan, a mortgage or credit cards, you are rewarded for paying your bills on time and penalized when you miss or are late on a payment. A mobile phone, however, affects your credit score only if you default on your monthly mobile phone bill payments and it is charged off or sent to collections. One key thing to know about charged-off debt, though—if your debt is charged off, you’re still obligated to pay it.
Payment History = 35% of Your Credit Behavior
There are five aspects of your credit behavior that are taken into consideration when calculating your credit score; payment history (35%), credit utilization ratio (30%)—your outstanding balance as it relates to your total amount of credit available, length of credit history (15%), credit mix (10%), and amount of new credit (10%.) Because your payment history is a major part of many scoring calculations, it is important that you avoid defaulting on any payments whatsoever, including your monthly mobile phone bill payment.
Don’t Let Defaulting Get You Down
While paying your mobile phone bill on time doesn’t affect your credit score positively, defaulting on the account is a serious negative that could have a potentially severe effect on your credit score. Is it already too late for you? If you currently have a defaulted mobile phone bill payment on your credit report, don’t be disheartened. Defaulted debt that’s either charged off or sent to collections will stay on your credit report for no more than seven years. However, if you pay it off and recommit to using good credit behaviors, like paying your bills on time each month, it will begin to recede into the past before you know it.
Making good credit a part of your everyday life is something you can always reaffirm your commitment to; good behaviors beget good scores, so know that your efforts to improve your habits won’t be in vain.
Level Up Your Score and Build Credit
Not sure where to start? Watch the video below for some inspiration on how to level up your score and build credit from Ash Cash, BankMobile’s resident Financial Empowerment Coach. You’ll be on your way to mastering your credit in no time.
The views and opinions expressed by the author are not necessarily those of BankMobile. The blogs are intended as general financial knowledge that may or may not be applicable to your individual needs. Always contact your accountant for tax advice.
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