Do phone plans affect your credit score?

While it is common knowledge that a personal loan or credit card can affect your credit score, many people don’t realise that their telecommunications services, such as mobile phone plans and internet provider contracts, can also have an impact.

Although telecom and utility service providers aren’t licensed credit providers, they do affect your credit score if you have defaulted on your payment, because these providers report defaulters to a credit rating bureau.

What will negatively affect your credit score, and for how long?

Late payments

Late payments are any payments made at 14 - 60 days past the due date. It’s important to remember that even if you’re late to pay a bill by just a few dollars, it will still be listed on your credit report as a late payment.

Late payments will stay on your credit report for two years.

Defaults

If you have a late payment for a bill that is over $150 and has been due for more than 60 days, it is considered a default.

Defaulting on your phone payment will not just prevent you from applying for other phone plans in the near future, but it could also affect your ability to get approval for a home loan or credit card, by negatively affecting your credit score. However, before the credit provider lists your arrears with the credit reporting agency, they should have taken steps to collect your payment along with a written notice specifying their intent to list it.

A default will stay on your credit record for five years.

What will positively affect your credit score?

It's not all doom and gloom with your phone plans and credit score. You can positively affect your credit score by doing the following:

Good payment history

If you exhibit a punctual history of phone payments, then it will positively impact your credit score.

Type of credit facility

The more information you give regarding your mobile phone bills or other utility bills, the better for any lender you approach to understand your financial situation clearly.

Pre-paid mobile and broadband plans

An option to avoid getting into the loop of late or non-payment of phone bills is to stick to pre-paid mobile and broadband plans. Nowadays, there are several choices and competitive prepaid plans on the market, where you can conveniently pay upfront for what you require for the month.