From credit cards and car payments to utility bills and rents, nearly every single bill you pay has the potential to impact your credit score. However, there are some bills that are not counted positively toward your credit report but can impact your score if you don’t pay them.
Rent, utility, Internet, cable and phone bill payments, for example, will not elevate your credit score if you pay them all on time. But if you miss payments on any of these bills and the providers decide to report you to a collector, this will appear on your credit report and ultimately have a negative impact on your score. In other words, if you do it right, you reap no rewards, but if you make some mistakes, it can have lasting effects.
There are a lot of misconceptions out there about these types of bills and their effect on credit scores. According to a national TransUnion online survey of 1,001 U.S. renters between the ages of 18 and 64, 48 percent of renters believe that rental payments are reported to the credit bureau, 53 percent believe payments for cable and Internet fees are reported, 54 percent believe utility fees are reported and 52 percent believe cell phone bills are regularly reported to credit bureaus. Only 29 percent knew that mortgage payments are reported to the credit bureau.
The lack of rent payment acknowledgment in credit reports may be changing, however, as some property managers have started to report these payments.
“Renters should be aware that property managers are starting to report payments to credit bureaus and they should be consistently monitoring what is being registered on their individual report,” said Ken Chaplin, senior vice president of TransUnion.
This is good news for those looking for different ways to improve their credit score, as 77 percent of the renters surveyed said their score would benefit if rent payments were reported.
There are five basic components of a credit score. Here is how a FICO score breaks down:
✓ 35 percent is based on payment history ✓ 30 percent is based on the amounts you owe ✓ 10 percent is connected to new credit ✓ 15 percent is length of credit history ✓ 10 percent involves the types of credit in use
This is the way the percentages distribute for most people; however, it may vary based on other factors, such as a shorter credit history. Those with limited histories may experience heavier weighting on issues such as late payments or high credit balances. Like a fluid balance, as the information on your credit report changes, so does the importance of any one component that determines your overall score. If you realize you have heavier burdens in one category, such as a high amount of debt or a significant new debt, be extra mindful of paying everything on time to keep your score at its optimum.