Bills, bills, bills–Destiny’s Child was onto something with their hit 1999 song of the same name. Having a lover who drives your credit score into the dirt is immediate grounds for relationship termination, but who else is to blame when it’s you who’s doing the damage? An even more pressing question is, what do you do when missing bill payments negatively affects your credit score, but making them doesn’t seem to have the opposite effect?
Fortunately, those days are nearly over. In the past, utility bills were not regarded as credit accounts, so that they couldn’t be factored into the estimation of your credit score. However, missing payments on your bills could force your account to close and send the collection companies calling, thereby negatively affecting your credit score for seven years. Some credit score-tracking agencies like Experian have created new programs that include specific utility bills to boost your score.
Experian Boost, for example, will use utility bills like cell phone bills and other telecom bills to give your score a leg up. You’ll have to confirm the bills you want Experian Boost to factor into your credit score, and the good news is that with this program, missed payments won’t negatively affect your credit score. The only time it can is to miss enough payments to compel a collection agency to come a-knockin’.
But before we go any further, let’s talk about which utility bills could hurt your credit score.
Like we mentioned earlier, any bill that’s late enough to be reported by a collection agency will unequivocally hurt your score. But if you miss a payment one time, you’ll most likely be fine. Did you know that there’s a difference between a late payment and an overdue one? The two might sound the same, but there are some critical differences between the two. A payment will only become overdue if it’s 30 days or more late. If your missed payment falls within the 30-day window, then it’s only considered a late payment. This difference is critical in that while you’ll still suffer a sizable late payment fee, as long as you make it within the 30-day window, it won’t be reported to a collection agency. This subtle difference can make or break your credit score. However, not all bills enjoy this 30-day grace period; some late bills turn into overdue bills much quicker than others.
One example of a bill with a relatively short grace period is car payments, with just five days to make your late payment before it’s reported. Mortgages, other loans, and homeowner insurance payments have a 15-day grace period. Credit cards take the cake for the shortest grace period, though–mainly because they don’t have one. If you are late by even a day on a credit card payment, you incur hefty late penalties and are subject to a potential collection agency report. Make sure you keep up on your monthly payments!
Perhaps this difference in grace period lengths is what makes utility bills prime candidates for boosting your credit score. Some late utility bills, like phone bills, have a grace period for as long as 60 days, and credit-boosting programs like Experian Boost will prevent late payments from negatively affecting your score. This fact means that you’ll have time to make good on your payments without suffering a lowered credit score. However, there are other ways to boost your credit score using your utility bills that don’t require the help of a program like Experian Boost.
If these programs don’t appeal to you, consider obtaining a secured or unsecured loan to pay your utility bills. The three big credit-reporting agencies, Experian, Equifax, and TransUnion, will see that you’re using this loan to pay your bills on time, and in turn, your score will steadily rise. The two factors to keep in mind when boosting your credit score are your payment history and credit history length. The longer you show you’re making your payments on time, the higher your credit score will be.
Another attractive option is hiring a fiduciary financial advisor. A trusted financial expert can help design a game plan to get your score in fighting form. Companies like SmartAsset even have tools to match you with a financial advisor that’s right for you, taking out the guesswork of choosing an advisor that suits your specific needs and has experience in handling financial situations like yours.
We hope you’ve learned a little about how to increase your credit score. As scary as late payments can be, they’re not necessarily a death sentence. One more word of advice, too: try your best to pay all of your bills on time, as it’s the easiest way to maintain a high credit score.