Your credit scores are calculated from your credit report data, so you want your reports to show a solid record of on-time payments. But not all of the payments you make show up on your credit reports.
That means gym memberships, your cable bill, health insurance premiums, and more are unlikely to help you build credit, even if you’ve been paying faithfully for years. However, not paying them can damage your score if your account is sent to Collections.
Here’s a look at whether recurring bills create credit and new ways to add them to your credit profile.
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Does paying a phone bill create credit?
Paying the phone company faithfully month after month doesn’t help you build credit, as phone companies typically don’t report to credit bureaus. Even financing your phone or leasing it through a phone contract won’t create credit because businesses don’t report the activity.
However, you may see a slight temporary drop in your credit score if the phone provider check your credit before authorizing yourself on a phone plan.
There are a few workarounds, however:
3 Ways To Use Your Phone To Create Credit
If you take out a personal loan to purchase 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 charges wouldn’t, however.
Likewise, you can indirectly get credit to pay your phone bill by putting it on a credit card and paying it on time. Your credit report will only show the credit card and not your phone plan, but paying your credit card bill on time, every time is a critical part of good credit.
Some scores now have the option to include “alternative data”, such as telephone and utility bills. Experience boost, for example, is a membership program that uses positive data from phone and utility payment records after you give Experian access to the account you use to pay those bills. It can help you increase 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, have not launched similar products. And while Experian’s algorithm increases most credit scores, it doesn’t increase all of them. If it drops yours, you can unsubscribe.
Does Paying Insurance Build Credit?
In most states, auto insurers are allowed to use information from your credit reports to help you set insurance rates. In this way, have a bad grade may result in higher auto insurance costs. (The exceptions are California, Hawaii, and Massachusetts.)
But paying your auto insurance premiums on time usually won’t help you build credit. Because auto insurance companies don’t lend you money, they don’t report your payments to the 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 them on a timely basis, your insurance payments can indirectly help create credit. And having a car loan or leasing can help you: Car payments are usually reported to the credit bureaus, so they affect your credit.
As with auto insurance, paying for health insurance (or not paying) does not affect your credit.
Does paying medical bills create credit?
Just paying medical bills usually doesn’t create credit unless you put them on a credit card. Then they are just like any other load, and pay on time and keep balances low can help your credit.
However, credit cards must be used as a last resort; it is often possible to find a cheaper way to pay or negotiate a discount.
There is medical credit cards, designed to help make reimbursement of medical expenses more affordable, but they are still credit cards and should be assessed the same as others. Know the annual percentage rate, payment terms and penalties that may apply. Compare them with other types of credit cards, such as those offering 0% interest offers.
Medical credit cards report to the credit bureaus. Likewise, medical loans are still on loans and report to the credit bureaus, so paying them on time will help build credit.
You get a break from medical debt: it can’t be reported to the credit bureaus for 180 days, so you have time to work out a payment plan or pay for the insurance. Additionally, medical collections should be removed from your credit report if they are subsequently paid for by insurance.
Does Paying Cable or Internet Bills Help Create Credit?
When you subscribe to cable or Internet service, you may need to accept a credit check. It may take a few points off your credit score if it is a “full investigation” of your credit. But a good credit score can save you from having to pay a down payment or get you a lower one.
However, paying utility and cable bills on time won’t improve your credit, as 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, it creates a good payment history and improves your score.
Non-payment may result in your account go to collections. Collections are reported to the credit bureaus and can seriously damage your score.
As with phone bills, cable and Internet bills can help your score if you go with Experian Boost. Your TransUnion and Equifax credit reports will not be affected.
Does Paying Tuition Help Build Credit?
Paying school fees doesn’t help your credit unless you take out a loan to pay it off and then pay the money back. Student loans, paid as agreed, will help build credit. But if you pay the tuition without financing it, your credit score will not be affected.
Does renting with an option to buy create credit?
Most hire-purchase operations do not report your payments to the credit bureaus, and payments that go unreported cannot increase your credit. Additionally, option-to-purchase leases typically cause consumers to pay significantly more for an item than it is worth.
Another type of rental can constitute your credit: Rent payments for a house or apartment can be reported to the credit bureaus and can help build certain scores.
What helps you build credit?
If you hope to plump a thin credit report, there are options to add credit lines without adding debt.
Two options to consider:
A secure credit card who reports to the credit bureaus. You can avoid getting into debt and paying interest by paying the fees online as soon as they are posted, while enjoying the benefit of credit.
Make sure you understand the fee structure of any loan before you apply. You can also search for a credit product that can be obtained without firm credit check so that the simple act of applying does not lower your credit score.
Either way, payments made on time and reported to the credit bureaus can help you create or replenish credit, even if some of your regular bills aren’t directly contributing to your score.