If is common knowledge that a personal credit bureau is composed of a list of debts that a borrower has taken out in the past, including their amounts and repayment history. What many borrowers don’t realize is that is more to the modern credit bureau than simply debt products. With the increasing prevalence of contractual obligations in utility and phone bills, many service providers have begun reporting their products to credit bureaus.
This means that the repayment history surrounding a cell phone or cable bill can sometimes have just as much of an impact on a person’s credit score as a line of credit or a personal loan. In order to help borrowers build and maintain their credit scores, this article is going to dig into which types of service bills will report on a credit bureau, and how it is that they will impact a credit score over time.
The most common bills to report on a credit bureau are from cell phone, internet, television, and heating/gas utility services. This is mainly because of the way in which these services generally include contractual obligations of payment over a fixed period of time (ie. A three year satellite TV plan). What’s more, these bills can also report as financing agreements when customers start bundling in purchasing agreements with their contracts.
For example, if a cell phone company were to bundle in a free smart phone with a subscription to a service plan over a given number of years, the contract actually becomes a financing agreement, in which the customer is agreeing to finance the purchase of the phone over the service period. The end result is that the cell phone company might go so far as to begin reporting this agreement as being a monthly obligation that reports in full on the credit bureau until the end of the service period.
In general, bills will only report on a credit bureau as being a simple ‘credit check’. While such a check does slightly reduce a borrower’s credit score over the short term, it will only do so incrementally, and such a hit is generally reduced in significance over time. So long as there are only a small and meaningful number of credit checks on a borrower’s profile, most lending institutions won’t actually be too concerned by the one-time transaction.
However, as mentioned above, there are a few situations in which a service bill can have a major impact on a credit score. Firstly, if a customer completely defaults on a service obligation (ie. refuses to pay their cell phone or television bill), the obligation will usually be sold off to a third party collections company, and reported on the customer’s credit bureau accordingly.
Such a write-off will cause significant harm to a borrower’s credit score, and make it very difficult for a customer to obtain funds or services in the future. Alternatively, a bill may report on a credit bureau in the event of a fixed term agreement.
For example, if the customer signs a 1year lease with a property manager, with the added benefit of receiving a free digital television box, the customer may actually be signing an agreement to finance that box as a portion of their rent. If the customer then refuses to pay their rent, they are also in default of the financing agreement, and will again find that their credit score will be harmed by negative repayment history.
Given the increasing complexity of personal obligations, and the continually blurring line between debt and service obligation, the main thing for a personal borrower to remember is that the repayment of obligations of any nature will generally reflect upon their financial character in some form or another. As such, it is important to make sure that obligations are budgeted for accordingly. If planned for properly, repayments to even simple phone and utility bill stand to put a borrower in a better position to meet their financial goals in the future