Does a cell phone contract help your credit?   Great question from one of our clients this week.  The short answer is no.  However…..with almost everything related to the topic of credit scores, there is a longer answer that must also be given.  Unless you are getting the pre-paid cell phones, this article is for you.

When you go to purchase a cell phone and sign up for a contract, the company is most likely going to check your credit before they give it to you.  When they ask for your full name, birth date and social security number, it’s probably for a credit check.  Then they either approve or deny your request for service with them.

Every time you authorize any company to check your credit, you will get a Hard Inquiry on your credit report.  This will count against your scores, whether you get approved or not. 

Most utility companies, including cell phone companies, do not pay to ’subscribe’ to the credit bureaus, so they do not do a monthly report to the bureaus for all of their customers.  So the cell phone bill you pay each month does not show up on your credit file.

NOTE:  If you stop paying your cell phone bill or cancel the service while you are still under contract with them, they will probably send your account to a collection agency and THEN it will most likely show up on your credit report.  And any collection item on your credit is negative and will hurt your scores.

WHAT TO DO
Limit the number of times you apply for credit.  This includes saying okay to the checkout clerk that asks if you want to save 10 or 15% today by applying for their store card.  Just Say No.

Always pay all of your bills on time.  Payment History is the number one factor in FICO scores.

If you cancel your cell phone service, and they say there will not be any other charges, GET IT IN WRITING!  You must have some protection for yourself other than “somebody from your company told me that it would be okay”.

Check your credit report regularly to make sure there are no errors or surprise negative items showing up.  You can get them at no cost here.  You actually get three per year – one from each of the credit bureaus.

You can contact us to order your credit check up for only $100.  We’ll do a thorough review of your report and give you information on how to positively impact all five parts of your credit scores. 

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