Accounts that dont report to the credit bureaus cant help your credit — but failing to pay them on time can hurt it.
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CFPB rule to remove medical debt from all credit reports: In January, the Consumer Financial Protection Bureau finalized a rule that would remove an estimated $49 billion in unpaid medical bills from the credit reports of roughly 15 million Americans. It would also stop medical bills from showing up on credit reports in the future and stop lenders from taking medical debt into account when making decisions.
The rule, which was set to take effect March 17, faces multiple lawsuits that say the CFPB overstepped its authority. In February, a district court judge granted a request to pause the rule for 90 days, and in May, the rule was stayed until July 28. The rule could also be overturned by Congressional resolutions. Our coverage of this rule and its impacts is ongoing.
Your credit scores are based on the information in your credit reports, so it’s important that they show a history of on-time payments. But not every payment you make gets reported to the three major credit bureaus — Experian, Equifax and TransUnion — which means they dont appear on your credit reports.
That means monthly rent payments, utilities, internet and phone bills, 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.
Here’s a look at whether recurring bills build credit, and how you might get them added to your credit profile.
Paying bills on time is an essential part of financial responsibility. But did you know it can also help build your credit? Here is a complete guide on how paying bills on time can boost your credit scores.
How Paying Bills On Time Impacts Your Credit
A big part of your credit score is how well you’ve paid your bills in the past. Credit score company FICO says that your payment history makes up 35% of your overall score.
When you pay your bills on time every month, you show lenders and creditors that you are a responsible person. This helps build and strengthen your credit profile over time.
On the other hand, paying bills late or missing payments altogether can seriously damage your credit Late payments will show up on your credit reports and hurt your credit scores
So by paying all your bills on time, every time, you avoid dings to your credit while steadily building it up.
Which Bills Help Build Credit?
Not all bills are reported to the credit bureaus – Equifax, Experian, and TransUnion. Generally, recurring payments like loans, credit cards, utilities, phone bills and rent can help build credit, especially if reported regularly.
Here are some common bills that could build your credit with on-time payments:
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Credit cards: Having open credit cards and always paying them on time can help your credit score a lot. Credit cards let you borrow money over and over again, which shows that you are a responsible person.
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Installment loans: On installment loans like auto loans, student loans, and personal loans, you make fixed payments on a regular basis. Being able to handle this kind of credit shows lenders that you can pay them back on time.
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Mortgage – A mortgage represents a large, long-term financial commitment. Making consistent mortgage payments demonstrates you can manage significant credit responsibility.
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Utilities – Gas, electric, water, cable, and cell phone bills. Utility payments are not traditionally reported, but can help build credit if reported regularly.
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Rent – Paying rent on time shows you can manage ongoing housing expenses. Some rental agencies may report rent payments to credit bureaus.
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Credit builder loans – These special loans are designed specifically to help consumers build credit history and scores. On-time payments are reported to the credit bureaus.
How To Get Bills Reported To Credit Bureaus
As mentioned above, not all bills and payments will automatically show up on your credit reports with the major bureaus. Here are some tips to get your payments reported:
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Ask providers – Contact your service providers directly and ask if they report payments to credit bureaus. See if they can start reporting your on-time bill payments.
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Use credit cards – Instead of paying bills directly through checking accounts or debit cards, consider putting recurring payments on a credit card. Credit card payments are always reported to the bureaus.
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Try third-party companies – Companies like RentTrack and PayRent can track rent payments and report them to credit bureaus for a monthly fee.
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Enroll in Experian Boost – This free service by Experian lets you opt-in to have utility and cell phone payments reported to your Experian credit file.
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Sign up for bill pay services – Companies like Paymentus allow you to pay bills through their system and they report payments in your name to the credit bureaus.
How Long Does It Take For Bills To Improve Credit Scores?
Building credit takes patience and consistency over time. In general, you should start seeing results of on-time bill payments reflected in your credit reports within a couple months.
But it can take between 6 months to a year of responsible behavior for significant improvement in your credit scores. Just stay diligent in paying all bills on time, while also keeping credit card balances low and avoiding new credit applications when possible.
With time, regularly paid bills combined with other smart credit management habits will contribute to stronger credit and higher scores. Monitor your credit reports and FICO or VantageScore frequently to track your progress.
The Bottom Line
At the end of the day, paying your bills consistently and on time simply makes good financial sense. But it also offers the nice side benefit of helping strengthen your credit standing over time.
Certain service providers and lenders report your payment history directly to the credit bureaus. So be sure to pay at least the minimum by the due date every month.
If some bills currently aren’t being reported, explore options to get them reported to build credit even faster. Maintaining positive payment behavior across all your financial obligations will demonstrate responsibility to potential lenders.
So pay those bills on time, keep credit utilization low, and let your credit build consistently each month through your demonstrated actions. With time and perseverance, you can improve your credit profile and reach your financial goals.
Does paying cable or internet bills help build credit?
Paying cable and internet bills on time wont help your credit because most utilities dont report to the credit bureaus. But, 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 cell phone bills, cable and internet bills can help your score if you opt in to a service like Experian Boost that gives you credit for utility and other kinds of payments. Just be mindful that not all of your credit reports will be affected.
Does paying medical bills build credit?
Simply paying medical bills typically doesnt 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 because 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 similarly evaluated. 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, to determine whats right for your circumstances.
Medical credit cards do report to the credit bureaus. And medical loans — unsecured personal loans used to pay for a wide range of medical expenses — report to the credit bureaus just like other types of loans, so paying them on time will help build credit.
Does Paying Bills On Time Build Credit? – CreditGuide360.com
FAQ
Does paying bills on time raise your credit score?
Yes, paying your bills on time significantly impacts your credit score, especially for debts reported to credit bureaus. In fact, according to Experian, payment history alone accounts for 35% of your FICO score.
What bills improve credit score?
If you don’t have any real credit history of previous loans or credit agreements, you’re probably wondering how you build up a good credit score. Just being on time with your water and energy bills will help you build a good payment history that will make it easier to get credit in the future.
Does your credit score go up if you pay on time?
Paying off your credit card balance every month is one of the factors that can help you improve your scores. Companies use several factors to calculate your credit scores. Some of the things they look at are how much credit you are using and how much you have available.
How to get a 700 credit score in 30 days?
Achieving a 700 credit score in 30 days is a very ambitious goal, and may not be realistic for everyone. However, focusing on key areas can lead to significant improvements. The primary focus should be on making all payments on time, reducing credit utilization, and disputing any errors on your credit report.