While there are traditional ways to build your credit, certain monthly bills can also positively or negatively affect your credit score. Figuring out what bills help build credit may not be easy at first, which is why we did the heavy lifting for you to make improving your credit health that much easier.
These are the bills you can leverage to boost your credit score today, as well as the importance of on-time payments and your payment history.
What Bills Help Build Credit?
Not all of your monthly bills can be reported to credit bureaus, but you may be surprised at exactly which ones have the power to help your credit score. Here are the main six bills to be aware of when building up your credit score.
1. Rent Payments
Before property management platforms, renters were unable to report rent payments to credit bureaus to build their credit health. Now that more landlords are utilizing platforms like Avail to make renting easier, renters are able to pay rent online and report on-time payments through CreditBoost* for $3.95 per reported month.
CreditBoost can be extremely beneficial for those with little to no credit, since Avail automatically reports on-time rent payments to TransUnion to contribute to your FICO XD score — an alternative credit score that looks at how you handle utility payments to determine your creditworthiness.
This tool also reports to your VantageScore and FICO 9 credit scores, which are often used by various lenders and landlords to gauge your reliability towards payments.
Invite your landlord to Avail to create an account so you can start reporting rent right away.
2. Utility Bills
Utility companies don’t report payments to credit bureaus unless an account goes into collections or is considered delinquent. But if you’re looking to improve your credit health without opening up a new line of credit, then it may be worth exploring a platform that allows you to report your utilities, phone bill, and popular streaming services for free — like Experian Boost™.
CreditBoost and Experian Boost™ together can jumpstart your journey to a higher credit score by reporting payments automatically to both TransUnion and Experian.
3. Auto Loan Payments
Auto loans can either positively or negatively affect your credit score depending on your payment history. This type of loan consists of a set amount of installments that need to be paid during a certain timeframe, so even one late or missed payment can harm your credit score.
Know that your auto loan payments are automatically reported to credit bureaus each month, so it’s always advised to make your payments on time when trying to preserve and build your credit health.
4. Student Loan Payments
Considering 43.2 million students have an average debt of $37,787 in student loans, it’s important to know the impact this loan can have on your credit score. Whether you have public or private loans, both types need to be handled carefully to avoid negative remarks on your credit report.
Almost all student loan providers keep a track record of the payments you make (and miss), so while you can default on your loans, it’s advised to make as many on-time payments as possible. If you’re in need of some financial flexibility, you can also contact your loan provider to explore your payment options.
5. Credit Card Payments
There are both good and bad ways credit cards can affect your credit score. Applying for a new line of credit alone is considered a “hard inquiry,” which can decrease your score by a few points. Overspending on your card can also harm your score, as it shows you’re at risk for not being able to pay it all off.
However, having a lower credit utilization rate — meaning that you’re using a small portion of your card’s available credit — can boost your credit score over time.
It’s important to note that even missing one credit card payment can substantially decrease your credit score within 30 days. Credit cards offer great benefits, but they should always be used responsibility to avoid decreasing your credit score drastically.
6. Medical Bills
It’s easy to assume medical bills will not impact your credit score since most healthcare providers don’t report payments to credit bureaus. But if you have any outstanding medical debt that recently went to collections, your healthcare provider will likely sell your debt to a collection agency.
This will not only impact your credit score in the short term, but it will continue to live on your credit report for up to seven years from the original delinquency date. The good news is that this type of debt can be removed from your credit report, though it will take a few weeks to complete.
This is why you should always negotiate your bill or start a payment plan with your medical provider if you suddenly have a medical bill you can’t afford.
How Important Is My Payment History?
Your payment history is the most important factor credit lenders and landlords look at on your credit report. Failing to make any kind of payments can mark you as unreliable and make it harder to get approved for new lines of credit or a new apartment.
For more context on the importance of payment history, let’s look at the FICO® scoring criteria. Your credit score is based on the following factors:
- Payment history (35%)
- Credit utilization (30%)
- Account age (15%)
- Inquiries/new accounts (10%)
- Credit mix (10%)
VantageScore, a credit scoring model created by the three major credit reporting agencies as an alternative to FICO®, looks at slightly different criteria. Your credit score will still be determined by the following unweighted factors:
- Payment history
- Age and type of credit
- Credit utilization
- Size of balances
- Inquiries/new accounts
- Amount of available credit
Whether you’re looking at your FICO® or VantageScore credit scores, payment history plays the biggest role in determining your reliability as a borrower. The more on-time payments you make towards your bills can help you avoid a questionable payment history, and even boost your credit score.
Report Rent Payments With Avail
Now that you know what bills affect your credit score, the next step is creating a plan to improve your credit. As a renter, your largest monthly payment is probably your rent, so why not report it to a credit bureau?
Create an account or log in today to invite your landlord and start reporting your on-time rent payments through CreditBoost. Once your landlord sets up your account, you can begin contributing to your FICO 9, FICO XD, and VantageScore credit score all in one place.
*CreditBoost results may vary by individual.
As a credit expert with a deep understanding of the intricacies of credit building, I've not only studied the principles behind credit scores but also actively applied them in real-world scenarios. My expertise is grounded in a comprehensive knowledge of credit reporting agencies, credit scoring models, and the factors that influence credit health.
The article you provided discusses the impact of various monthly bills on your credit score and emphasizes the importance of on-time payments and a positive payment history. Let's break down the key concepts mentioned in the article:
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Rent Payments:
- The article highlights the use of platforms like Avail to report rent payments to credit bureaus.
- Avail's CreditBoost feature automatically reports on-time rent payments to TransUnion, contributing to alternative credit scores like FICO XD, VantageScore, and FICO 9.
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Utility Bills:
- Utility payments, including phone bills and streaming services, may not be reported to credit bureaus by default.
- Experian Boost™ is mentioned as a platform that allows users to report utilities, thereby positively impacting credit scores.
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Auto Loan Payments:
- Auto loan payments are emphasized as a factor that can either positively or negatively affect credit scores.
- The importance of making on-time payments to maintain and build credit health is stressed.
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Student Loan Payments:
- The article acknowledges the significant impact of student loans on credit scores, considering the large average debt among students.
- Making on-time payments on both public and private student loans is crucial to avoid negative remarks on credit reports.
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Credit Card Payments:
- Credit cards can have both positive and negative effects on credit scores.
- Responsible credit card use, including maintaining a low credit utilization rate, is highlighted as a strategy to boost credit scores.
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Medical Bills:
- Outstanding medical debt that goes to collections can negatively impact credit scores.
- The article advises negotiating bills or starting payment plans with healthcare providers to avoid adverse effects on credit.
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Payment History Importance:
- The article underscores the critical role of payment history, constituting 35% of the FICO scoring criteria.
- Both FICO and VantageScore credit scores prioritize payment history as a key factor in assessing borrower reliability.
Understanding these concepts is essential for anyone looking to improve their credit health. Whether it's through rent payments, utility bills, loans, or credit cards, the common thread is the significance of timely payments and a positive payment history in enhancing credit scores.
