Will Late Cell Phone Payments Hurt Credit?

Late payments and related items like account write-offs and court judgments hurt your credit rating when they show up on your credit reports. Certain accounts, such as loans and credit cards, always show up on your TransUnion, Equifax and Experian reports. Other bills do not appear in your files unless you neglect them and cause the creditor to take reportable action against you.

Reportable Actions

Typical items that get added to your credit reports include repossessions, foreclosures, financial judgments and bankruptcy filings. Your cell phone company may eventually sue you for non-payment, resulting in a judgment that gets reported by TransUnion, Equifax and Experian. The phone service provider might opt to sell your account to a collection agency. Debt collectors often report this to the credit bureaus, which adds the collection account to your files.

Effects

Both court judgments and collection agency accounts hurt your credit, according to the MyFICO credit scoring company website. Lenders who review your credit reports when you request new accounts see those items and classify you as a high risk borrower. Judgments and collection accounts are part of your payment history when your score is calculated. The history makes up 35 percent of your score, so your unpaid cell phone bills harms it badly. The effect is compounded if you have other unpaid bills too.

Confirmation

The Fair Credit Reporting Act gives you a way to confirm whether cell phone-related entries are showing up on your credit reports. You can order free reports from TransUnion, Equifax and Experian every 12 months (see Resources). The reports include keys to help you interpret the data so you can figure out whether any judgments and collection agency accounts resulted from your cell bill.

Solution

You can sometimes undo the damage caused to your credit by late cell phone payments by reaching a settlement with the phone company or debt collector. Negotiate a lump sum payment for the judgment or collection agency account in return for removal from your credit report. You can often settle for less than the original bill. Pay the agreed-on amount after you get a written promise that the credit report entry will be erased.