Understanding How Bills Affect Your Credit Scores

At O1ne Mortgage, we understand that managing your finances can be complex, especially when it comes to understanding how your bills impact your credit scores. In this blog, we will delve into the various types of accounts that can affect your credit scores, how you can get credit for your bills, and other factors that influence your credit scores. If you have any mortgage service needs, feel free to call us at 213-732-3074. Our team is here to help you navigate the complexities of credit and mortgage services.

Do Bills Affect Your Credit Scores?

Yes, certain bills and how you pay them can significantly affect your credit scores. Credit scoring companies use statistical analysis to predict whether you’ll pay back money you’ve borrowed. They base their credit score calculations on the contents of your credit reports—specifically, the records of your payment history compiled at the three national consumer credit bureaus: Experian, TransUnion, and Equifax.

Issuers of consumer credit, such as banks and credit card companies, report your bill payment information to the credit bureaus because all lenders benefit by knowing which potential borrowers pay their debts on time (and which do not). Payment history isn’t the only thing that affects credit scores, but people who pay their debts on time tend to have higher credit scores than those who sometimes make late payments.

Debt collection companies, which pursue bills in default, also report payments they’re seeking to the credit bureaus. Collections can include any unpaid bills, not just those related to loans or credit, and, as you’d expect, they tend to hurt your credit scores.

Now, you can also include eligible non-credit monthly bill payments, such as utilities, rent, and insurance, on your Experian credit report to help your credit scores based on Experian data.

Types of Accounts That Can Impact Credit Scores

Traditionally, credit reports have recorded payments on two types of debt: installment loans and revolving credit accounts.

Installment Credit: This is a lump sum of money you borrow and pay back in a series of equal payments over a set number of months. Student loans, car loans, and mortgages are all examples of installment loans.

Revolving Credit: This includes credit card accounts and home equity lines of credit (HELOCs), which allow you to borrow against a set credit limit and make repayments of varying amounts, as long as you meet a required minimum payment each month.

How to Get Credit for Your Bills

Experian Boost lets you add your history of certain eligible household bill payments to your Experian credit file. Doing so could help improve your FICO® Score based on Experian credit data.

You choose which bills’ payment information you want to share, and Experian Boost will add up to two years’ worth of payment history to your Experian credit report. The types of bills you could add include:

• Phone bills (mobile and landline)
• Utility bills (gas, water, electricity, and solar)
• Insurance (excluding health insurance)
• Residential rent (if paid online)
• Internet, cable, and satellite bills
• Video streaming subscriptions
• Trash collection services

Experian Boost only considers on-time payments and ignores late payments, so using this free feature cannot hurt your FICO® Score. As soon as you share new payment information through Experian Boost, the impact on your FICO® Score 8 will be shown.

What Else Affects Your Credit Scores?

Payment history is the most significant influence on your credit scores, accounting for approximately 35% of your FICO® Score. Other factors that affect credit scores include:

Credit Usage: The credit available to you, and the portion of it you’re using, accounts for about 30% of your FICO® Score. Keeping your credit utilization ratio—the amount of available credit you’re using on your revolving credit accounts such as credit cards—as low as possible can promote credit score improvement.

Credit Management Experience: Lenders view a track record of handling credit over time as a sign of creditworthiness. Credit scoring systems measure this using a factor known as age of accounts, which is responsible for roughly 15% of your FICO® Score.

Variety of Accounts: Lenders appreciate borrowers who can balance multiple debts at once, including a combination of installment loans and revolving credit. The FICO® Score sums this up in a factor known as credit mix, which accounts for about 10% of your score.

Recent Credit: Applying for a new loan or credit account and taking on new debt can signify or cause financial distress, so credit scores typically dip a bit. They will typically rebound within a few months if you keep up with all your payments. New credit activity is responsible for about 10% of your FICO® Score.

Serious Negative Events: Negative credit report entries, such as collections and bankruptcies, which only appear if you’ve suffered a severe mishap or made a major misstep, can have severe negative impacts on credit scores. A Chapter 7 bankruptcy, for instance, remains on your credit report for up to 10 years and may decrease your ability to get new credit for much or all of that time.

The Bottom Line

Historically, only debt-related payments and information influenced your credit scores. Now, however, certain other monthly bill payments could also help your credit scores powered by Experian.

Ultimately, your ability to balance debt repayment is most clearly reflected in the strength of your credit scores. If you are planning to apply for new credit, or you’d just like to know where you stand, checking your credit report and credit score for free can help you find areas of improvement.

At O1ne Mortgage, we are committed to helping you understand and improve your credit scores. For any mortgage service needs, call us at 213-732-3074. Our team of experts is ready to assist you in achieving your financial goals.

Learn More About How Bills Affect Your Credit

Can Cellphone Bills Help Build Credit? Your cellphone bill can help you build credit if you add it to your credit report. Learn how.

Can Automatic Bill Payments Help My Credit Score? Automatic bill payments can help you avoid late fees and promote credit score improvement by preventing late or missed payments.

How Utility Bills Can Boost Your Credit Score: Utility companies don’t share payment history with the credit bureaus. But Experian Boost can add on-time utility payments to your Experian credit report.

Can Medical Bills Hurt Your Credit? Unpaid medical bills can leave your credit score in critical condition. Take these steps to protect your credit score from medical debt.

What Types of Debt Can Go to Collections? If you’ve missed multiple payments on your loans, credit cards, medical debt, utility bills, or government debt, your account could go to collections.