Shopping for a New Phone Plan? Here’s How Your Credit Will React

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You likely already know that the condition of your credit reports is going to matter when you try to borrow money to do something like purchase a home or a car. You may also recognize that your credit is important when you need to lease an apartment or open a new credit card.

What you may not know is there are companies other than lenders and apartment complexes that use your credit reports to assess the risk of doing business with you. Utility companies and mobile phone providers are two other types of businesses that will commonly check your credit report when you apply for a new account.

How Your Credit Can Affect You When You Apply for a New Wireless Account

Mobile phone providers are just like many other companies: They don’t want to extend services or offer financing options on expensive smart phones and other devices if they are unlikely to get paid back what they are owed. So, since they don’t know you, mobile phone providers typically consult your credit reports and scores to help determine the following:

  • Whether they want to do business with you, at all
  • How much of a deposit their company should require from you
  • What to charge you on a monthly payment
  • Whether or not to require a co-signer to subsidize their risk

Minimum credit requirements can vary greatly from one cell phone provider to the next. However, one thing they all tend to have in common is that the applicants with the best credit typically get access to the best deals. Sounds just like lending, doesn’t it?

Will Your New Cell Phone Affect Your Credit Reports or Credit Scores?

There is a chance that your new cell phone might impact your credit score. But, it might not impact it in the way you think. Here’s a breakdown of the credit scoring facts.

1. Your mobile phone account probably won’t show up on your credit reports, with one or two exceptions. In general, your cell phone account will not show up on your credit reports if you’re making your payments on time. However, a new service called Experian Boost may give you the ability to add your positive utility-style accounts (like mobile phone, cable, satellite or actual utilities) to your Experian credit report. Although this won’t help all three of your credit reports, it could potentially help you to see some improvement on your Experian report, if the payment history on your cell phone account is positive.

Cell phone accounts or “tradelines” are scorable under the most recent FICO and VantageScore credit scoring systems. This means your scores will benefit from the cell phone account if it were to appear on your Experian credit report.

2. The second exception is NCTUE, which is a company that you’ve probably never heard of. Don’t feel bad, most people have never heard of NCTUE. NCTUE is the National Consumer Telecom and Utilities Exchange. Think of this organization as a credit bureau but for utility and utility style accounts. They are huge, the fourth largest credit bureau actually. It’s very likely that whatever account you end up opening will end up on your NCTUE report, so make sure you pay it on time, every month.

3. If you default on your mobile phone bill, a related collection account may be added to your credit reports, all of them. Paid-as-agreed cell phone accounts don’t normally show up on credit reports. Defaulted cell phone accounts, on the other hand, are another matter. When you default on a cell phone bill, the account may eventually be assigned to a third-party collection agency. Once this happens, there’s a good chance that the collection account will be added to your credit reports in short order.