Making an effort to keep your bills paid on time is always a good idea, and for a variety of reasons. Whenever you make your payments late or become past due on a financial obligation, it can trigger some pretty unpleasant consequences. Sometimes that might include damage to your credit reports and scores, but not always.
If disaster strikes and you find yourself in a situation where you have more bills than money to pay them, you may be facing some tough choices about which financial obligations to take care of first and which ones to let slide while you try to dig yourself out of the hole. If you’re worried about the impact of a missed payment on your credit, you should know that not every account is necessarily going to have an immediate impact on your credit scores.
In order for an account to impact your credit scores, it first has to show up on your credit reports. If an account isn’t reported to the credit bureaus, then it can’t impact your scores in any way. The reason is simple: Credit scoring models are designed only to consider the information that’s present on your credit reports.
Bills That Generally Don’t Impact Your Credit Scores
- Utilities (e.g., gas, water, or electric service)
- Cable, satellite, or internet service
- Insurance premiums (e.g., auto, homeowners, health, and life insurance)
- Childcare
- Medical bills
- Rent
- Mobile phone service
- Gym membership dues
The accounts listed above are generally not reported to the three credit reporting agencies (Equifax, TransUnion, and Experian). This means that if you fall behind or miss a due date on one of these financial obligations, your credit scores won’t be impacted negatively.
Of course, even if your credit scores aren’t immediately impacted, you could still face late fees, account closure, suspension of services, cancellations of membership, and a host of other negative ramifications.
Unfortunately, paying these bills on time won’t do anything to help your credit scores either.
And, if you miss several payments and eventually go into default, there’s a real possibility that the original creditor will send your account to a third-party debt collector, and they almost always report to the credit bureaus.
Bills That Can Impact Your Credit Scores
- Credit card payments
- Personal loans
- Student loans
- Mortgages
- Auto loans
- Home equity loans and lines of credit (HELOCs)
These represent some of the most common types of accounts likely to show up on your credit reports. Any account reported to the credit bureaus has the potential to impact your credit scores, one way or another.
If you properly manage the accounts that show up on your credit reports — paying your bills on time, every time, and keeping your balances low — your credit scores should greatly benefit. However, if you fail to manage these accounts well, or if you stop paying as agreed, then your credit scores are probably going to suffer some damage.
Beware the Exception to the Rule
Although there’s a long list of accounts above that do not typically appear on your credit reports, that doesn’t mean those accounts can’t be added later. The above list is accurate as of the publication of this article.
Because credit reporting is voluntary and the credit bureaus can always change their policies and practices, there could come a day when any or all of the above accounts could commonly show up on credit reports. That would mean even lower level late payments could end up on your credit reports and lower your credit scores to some extent.
The easiest way to avoid any ambiguity in credit reporting is to simply avoid missing payments.
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John Ulzheimer is an expert on credit reporting, credit scoring, and identity theft. He has written four books on the topic and has been interviewed and quoted thousands of times over the past 10 years. With time spent at Equifax and FICO, Ulzheimer is the only credit expert who actually comes from the credit industry. He has been an expert witness in over 230 credit related lawsuits and has been qualified to testify in both federal and state courts on the topic of consumer credit.
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