Dear Creditnet: I just got a new cell phone and the salesperson mentioned that paying my bill on time each month will help improve my credit. Is this true? If so, will the new cell phone bill have the same type of positive effect on my credit scores as my student credit cards and student loans? - Sandra L. from CA
Answer: Rule #1: It's never a good idea to take credit advice from a cell-phone salesperson. In this case, he or she was most certainly feeding you a line of garbage to help close the sale and send you on your way with a shiny new phone. The truth is paying your cell phone bill on time each month will do absolutely nothing to improve your credit scores.
However, it is important to remember that if you miss payments and your cell phone bill ends up in the hands of a collection agency, you can rest assured your credit scores will take a big hit. So, cell phone bills can hurt a lot, but they can't help. Seem unfair?
Well, I guess it does in a way, but cell phone providers simply aren't interested in reporting your payment history to the major credit bureaus. It's not like they're providing you with a loan or a line of credit which you will need to repay over time. A collection agency, on the other hand, will usually report your account to the credit reporting agencies as soon as it falls into their hands and they set out to collect the debt. They know that one of the best ways to get your attention and convince you to pay up is by reporting an ugly collection on your otherwise pristine credit reports. It works much better than making unexpected phone calls or sending nasty letters.
Like any other utility bills you may have, make sure you always pay your cell phone bill on time and in full. While your payments won't do anything to help build your credit scores, they will protect you from dealing with an unwanted collection that could not only hurt your credit scores but also hang around on your credit reports for many years to come. Photo by Johan Larsson