How Paying Bills Can Affect Your Credit Score
6 Min Read | Last updated: September 13, 2024
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Paying a rent or phone bill late usually won’t affect credit scores, but if your debt goes into collections, scores may nosedive.
At-A-Glance
- Paying non-credit bills like rent, utilities, and medical expenses on time won’t bump up your credit score because they’re usually not reported to credit bureaus.
- But if they’re very late or in collections, they’ll likely get reported and affect credit scores negatively.
- As of July 1, 2022, the three major credit reporting bureaus must wait one year before putting medical debts from a collection agency on credit reports.
It’s relatively common knowledge that payment history probably carries the most weight in credit score calculations. Whether you pay bills on time, late, or entirely miss payments accounts for 35% of FICO credit scores, the most widely used credit scoring model for lending decisions.1 But did you know that when it comes to late bills affecting credit scores, not all bills are created equal?
How Do Late Bill Payments Affect Credit Scores?
Late bills can affect credit scores in different ways because the credit reporting agencies – Experian, TransUnion, and Equifax – consider borrowing-related bills differently than other bills, like rent, utilities, and medical bills. One late payment on a credit card, personal or auto loan, or mortgage might have an immediate negative effect, though it would likely be small if it was only a single late payment. Consistent on-time payments for those credit-related bills helps improve your credit score.2
But unless they become very late, everyday utility, cable, or cell phone bills are generally invisible to credit reports – and therefore not counted in your credit score at all. Meanwhile, late medical bill payments are often granted special consideration by credit agencies.2
Let’s take a deeper dive into the various types of noncredit bills and how their late, missed, and on-time payments can impact your credit score.
How Does Not Paying Rent, Electric, or Phone Bill Affect Credit?
If a renter is less than five days late paying their rent, it should be no big deal. After that, when a rent payment is 30 days or more past due, they can choose to report that late payment to the credit bureaus.3 In general, late payments could have a bigger impact on your score if you have a high credit score, according to Fair Isaac Corp., provider of FICO. Lower credit scores would lose fewer points from a single late payment because they already reflect a higher level of nonpayment risk, FICO notes.4
If you’re late on one payment on a telecom bill – meaning, landline or mobile phone, internet, and cable TV – depending on the service provider, it probably won’t make any difference to your credit score.2 But missing multiple telecom payments – or neglecting an unpaid bill altogether – may negatively affect your credit score because your service provider might report the late or missed payments to one or more credit bureaus.
Much like telecom bills, utility bills like water, gas, and electric usually don’t surface on your credit reports unless you default.2 These utility bill payments typically affect your credit score most if you’ve missed so many payments that a service provider closes your account and transfers your debt to a collection agency to obtain payment, considers it uncollectible, or charges-off your account, concluding that you’re not going to pay the debt.
If those bills enter collection or are charged-off, they could affect your credit score unfavorably. If the collection agency opens a collections account in your name and sends a record of it to one or all of the three major credit bureaus, it will become part of your credit history.1,2,3 Missed payments, collections, repossession, and foreclosure are regarded as “derogatory marks” and stay on your credit file for seven years, even if you pay back the collection agency.5 While some newer credit scoring models won’t factor paid collections accounts into credit score calculations, older models may – and most lenders commonly use older credit scoring models when making lending decisions.6
Do On-Time Utility Bill Payments Hike Up Your Score?
On-time utility and telecom bill payments usually don’t influence your payment history, so they typically won’t help to raise your credit score, either. But that’s evolving, and there already are special circumstances. For instance, Experian offers an online tool called Experian Boost that lets you use your utility, telecom, and other service bills to garner recognition for a positive payment history. Once you give Experian the go-ahead to access your bank account and identify utility, telecom, and other payments, you can ask to have it added to your credit file, and you may see an increase in your FICO score, according to Experian.2,3
Can Medical Bills Ruin Your Credit?
Medical bills get special consideration. Billing errors and insurance disputes, for example, might lead to late payments. In fact, according to the Consumer Financial Protection Bureau (CFPB) about 20% of Americans have medical debt, and "mistakes and inaccuracies in medical billing are common."7 Other circumstances, like large unexpected medical expenses, may also lead to account delinquency – even for people with excellent credit history.
But, it’s usually harder for past-due medical bills to hurt your credit score than for borrowing-related bills to do so.2 Instead of reporting delinquent bills to a credit bureau, health care providers send them to a collection agency, and then the information is reported to the bureaus – which takes time.8
As of July 1, 2022, the time period before unpaid medical collection debt can appear on a credit report increased to one year.8 This extension gives consumers more time to make payments, establish payment arrangements with medical providers or insurance companies, and resolve any errors – especially because medical debt in collections is less predictive of future payment problems than other types of debt collections, according to the CFPB.7 If you’re working out a coverage dispute with an insurer, it’s a good idea to inform the health care provider and ask them to delay reporting late or missed payments. In certain states, you might be able to appeal an insurance denial and, in some cases, you may negotiate the payment amount.9
No matter the cause, if no resolution is reached, it is possible for late medical bills to ruin your credit. How big a dent medical bills make in your credit score also depends on the credit scoring model being used. Experian also notes that if a lender uses FICO Score 9 or 10, then your medical debt will be weighed less than other debts. That’s thanks to FICO’s recognition of all the issues just described. But the most widely used credit scoring model is still FICO Score 8, which counts all debts equally.6
The Takeaway
With rent, phone bills, electric bills, and other utilities, on-time payments or one late payment typically won’t make any difference to your credit score, because they’re not considered credit accounts by the three major credit bureaus. But these bills may affect your credit score negatively if you’ve missed so many payments that a service provider transfers your debt to a collection agency. Medical bills can hurt your credit, too, if they go into collection. On the flip side, if you have an excellent on-time record with such noncredit-related bills, there are ways emerging for it to boost your credit score.
1 “What Affects Your Credit Scores?,” Experian
2 “What Kinds of Bills Affect Credit Scores?,” Experian
3 “Can Late Rent Payments Hurt My Credit Score?,” Experian
4 “How Credit Actions Impact FICO® Scores,” myFICO
5 “What Does “Derogatory” Mean on a Credit Report?,” Experian
6 “Can Paying off Collections Raise Your Credit Score?,” Experian
7 “CFPB Kicks Off Rulemaking to Remove Medical Bills from Credit Reports,” Consumer Financial Protection Bureau
8 “Can Medical Debt Impact Credit Scores?,” Equifax
9 “How to appeal an insurance company decision,” HealthCare.gov
Randi Gollin is a freelance writer and editor who’s covered topics including shopping, travel, dining, and food for tech and media brands and digital publications.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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The material made available for you on this website, Credit Intel, is for informational purposes only and intended for U.S. residents and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.
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