Paying your bills on time is the most important step you can take toward building a strong credit score. The higher your score, the more likely it is you’ll qualify for the best products at the lowest rates.
Not all bills, however, will affect your credit score. Only those monthly payments that are reported to the three national credit bureaus (Equifax, Experian and TransUnion) can do that. Typically, your car, mortgage and credit card payments count toward your credit score, while bills that charge you for a service or utility typically don’t.
On this page
- Rent
- Utility, cable, internet and phone bills
- Insurance payments
- Car payments
- Mortgage payments
- Credit card payments
Rent
You’d think paying your rent on time would boost your credit score. Traditionally, though, on-time rent payments haven’t been reported to the three credit bureaus and therefore have no impact on your score.
This is starting to change. Equifax, Experian and TransUnion will now include rent payments in your credit reports, but it’s up to your landlord or property management company to report those payments to the bureaus. If they choose not to, your rental payments will continue to have no effect on your score. Experian recommends that you ask your property management company or landlord whether they report rent payments to the bureaus. If they don’t, you can sign up for a service that will, such as RentTrack or PayYourRent, which generally charge a fee.
Utility, cable, internet and phone bills
Paying your utility bills or bills related to cable, internet and the phone typically won’t help your credit score. That’s because these types of companies typically don’t report payments to the credit bureaus.
But this, too, is starting to change. Experian Boost is a relatively new service that adds your utility and telecommunications payments to your credit report by connecting to your online bank accounts.
Bear in mind: Just because a bill doesn’t directly affect your credit score is no reason to take it lightly. Miss too many payments, and your creditor could send your account to a collection agency. Having an account in collections will show up on your credit report and lower your credit score. And even if you pay off the debt, a collection notice remains on your credit reports for seven years.
Insurance payments
Your monthly payments for life, car, renters, homeowners and health insurance may hurt your score if you pay late, but they won’t help if you pay on time since they are typically not reported to the credit bureaus.
You do not want to fall behind on insurance payments. If your insurers drop you from their coverage, you could find yourself in financial pain due to accidents or medical costs. And if a fire should destroy your household items? Without insurance, you might find yourself running up debt to replace furniture, clothing and electronics.
Car payments
The payments you make on your vehicles are reported to the three credit bureaus. If you pay these on time every month, your credit score will get a boost. If you’re late? Even one missed payment can cause a high credit score to drop by triple-digit points.
A late payment on your auto loan remains on your credit report for seven years. This means lenders see that missed payment whenever you apply for a loan. This could result in a rejection or higher interest rates.
The good news is that a payment may not officially be reported as late to the credit bureaus until it is at least 30 days overdue. So if you’re late on your car payment by just two weeks? Make that payment immediately to save your credit score.
Mortgage payments
Your monthly mortgage payment is another important bill to always pay on time. For one, it is reported to the credit bureaus, and it has a significant impact on your credit score. More important, if you fall too far behind on your payments, your lender could initiate foreclosure proceedings, which could eventually lead to the loss of your home. Foreclosures will remain on your credit report for seven years and will cause your credit score to plummet.
Credit card payments
The payments you make on your credit cards are also reported to the credit bureaus and can have a big impact on your score. And remember that your credit card provider might charge you a penalty for making a late payment, perhaps saddling you with a high penalty interest rate, which can add up quickly on any balance you’re carrying.
FAQs
Only those monthly payments that are reported to the three national credit bureaus (Equifax, Experian and TransUnion) can do that. Typically, your car, mortgage and credit card payments count toward your credit score, while bills that charge you for a service or utility typically don't.
What kind of bills affect your credit score? ›
The types of bills that affect your credit scores are those that are reported to the national credit bureaus. This includes consumer debts and unpaid bills turned over to collections.
How does credit score affect monthly payments? ›
If your credit score is in the highest category, 760-850, a lender might charge you 3.307 percent interest for the loan. This means a monthly payment of $877. If, however, your credit score is in a lower range, 620-639 for example, lenders might charge you 4.869 percent that would result in a $1,061 monthly payment.
What affects your credit score quizlet? ›
These three factors affect your credit score: Type of debt, new debt, and duration of debt.
What bills do not affect credit score? ›
Common monthly bills that have no direct impact on your credit score: Utilities (gas, water, and electric service) Insurance payments (auto, renter and homeowner insurance, etc.) Bills from medical providers.
How do unpaid bills affect credit score? ›
No matter what kind of bill is unpaid, the short-term effects to your credit can include: Drop in credit score. Additional fees (late fees, repossession fees, and collection costs) added to the amount you owe. Lower chances of refinancing other loans or making new purchases in the near future.
Does minimum monthly payment affect credit score? ›
What you might not know is that sticking to the minimum payment plan each month might impact your credit scores too. This is because of the factors that make up your credit score. Payment history matters most where your credit score is concerned. It's worth 35% of your FICO Score.
Does making multiple payments a month hurt your credit score? ›
The catch, as already discussed: That's not the case. That said, making two payments per month actually can help your score—but for a different reason. This strategy makes your credit utilization ratio appear lower, which can boost your credit score in the long run.
Do monthly bills build credit? ›
Paying cell phone, rent and utility bills can help you build credit if your on-time payments are reported to the credit bureaus. But even if they're not directly impacting your credit, it's a good idea to pay all your bills on time if you can.
What are the 3 biggest factors impacting your credit score? ›
The 5 factors that impact your credit score
- Payment history.
- Amounts owed.
- Length of credit history.
- New credit.
- Credit mix.
Payment history can show how likely you are to pay back your loans and is an important part of calculating your credit scores. Credit scores help lenders make decisions about loan approvals, loan terms and more. Late, missed or delinquent payments can negatively impact credit scores and creditworthiness.
What's the most income you should use on monthly credit card payments? ›
Ideally, financial experts like to see a DTI of no more than 15 to 20 percent of your net income. For example, a family with a $250 car payment and $100 of monthly credit card payments, and $2,500 net income per month would have a DTI of 14 percent ($350/$2,500 = 0.14 or 14%).
What is the number one thing that affects your credit score the most? ›
Your payment history carries the most weight in factors that affect your credit score, because it reveals whether you have a history of repaying funds that are loaned to you.
What is a credit score and what affects it? ›
Quick Answer. Credit scoring systems comb and analyze credit reports to evaluate how you manage credit. They focus on factors such as your payment history, your total debt, usage of available credit, length of credit history, credit mix and new credit.
What factors affect credit the most? ›
The two major scoring companies in the U.S., FICO and VantageScore, differ a bit in their approaches, but they agree on the two factors that are most important. Payment history and credit utilization, the portion of your credit limits that you actually use, make up more than half of your credit scores.
What brings credit score down the most? ›
If you are more than 30 days past due on a payment, credit issuers will report the delinquency to at least one of the three major credit bureaus, likely resulting in a drop in your score. Payments that become 60 or 90 days past due will have an even greater effect on your score.
What affects my credit score the most? ›
Most important: Payment history
Your payment history is one of the most important credit scoring factors and can have the biggest impact on your scores. Having a long history of on-time payments is best for your credit scores, while missing a payment could hurt them.
What utility bills build credit? ›
Utility companies typically don't report your payment history to the credit bureaus. But paying utility bills on time can help your credit score when you use Experian Boost. This tool specifically integrates gas, electric, water and other utility payments into your Experian credit report and scores.
How to find out what is affecting your credit score? ›
Your credit reports reveal your payment history, or whether you've consistently paid bills and other obligations on time. FICO says payment history accounts for 35% of your score. VantageScore says payment history counts for 40% of its 3.0 scoring model.
