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Does paying phone bills build credit?

You might not know this, but your mobile phone contract is actually a type of loan. This means that your monthly phone bill payments do show up on your credit report.

How does paying phone bills build credit?

It really depends on a few things.

First, how long have you had the phone contract? The age of a "credit account" is seen as a positive thing, so try not to switch mobile phone networks too often.

Second, how regularly do you pay for your phone contract? You should pay it via Direct Debit so each payment goes out on time and on the same date. This will improve your credit history. You can even get a double boost by paying your phone bill through your credit card. This way, you will show that you use credit responsibly and boost your credit score even more. But if you miss a payment, pay late, or fail to repay your credit card bill, it will hurt your credit score.

Third, if your phone contract is paid in full. If you took a phone contract that came with a premium handset but then stopped paying your monthly bill, three things will happen:

  • The mobile phone company will cut your access, which means that you won't be able to use that number anymore;
  • You will have to pay a cancellation fee, usually similar to the amount remaining in the contract.
  • Your contract will be marked as "defaulted" in your credit report. A default can drop your credit score by up to 350 points, regardless of the amount owed. It also stays on your credit file for six years, even if you pay it.

One more thing. Whenever you make a phone contract application, even if you change your mind, you trigger a hard check on your credit report. It might hurt your credit score if you have more than two in a six-month period. So, again, don't try to switch too often.

Will a SIM-only phone contract help me build credit?

‍Usually, it doesn't. But you can make it count using a service like Experian Boost. This is a free credit-boosting service offered by Experian. You only need to connect your bank account to your Experian account. Once connected, your regular phone contract payments can start to count towards your Experian credit score. Not every contract will be eligible, though – you should try paying by Direct Debit to make it count. Paying your bills by Direct Debit can actually help you build your credit history over time.

Experian Boost isn't the only credit-building tool you can use. Another one is Wollit. While Wollit doesn't cover phone bills, it does report your monthly subscription as a loan repayment, helping you build your credit history and potentially improving your credit score in the process. It can also make your rent payments count towards your credit history with Experian.

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Terms apply. Results may vary. Improvements to your credit score are not guaranteed. Wollit Credit Builder plans are unregulated.