Although it is common knowledge that a personal loan or credit card can affect your credit score, many people don’t realize that their telecommunications services, such as cell phone plans and service provider contracts. Internet access, can also have an impact. Although telecommunications and utility service providers are not approved credit providers, they do affect your credit score if you are in default. These providers report defaults to a credit rating agency.
In an investigative report by the Telecommunications Industry Ombudsman (TIO), it was found that telecom sales tactics were causing thousands of phone users to pay bills beyond affordability. The report also found that in some cases, especially when salespeople needed to meet their sales targets, they tended to offer customers an expensive product, beyond their ability to cover the additional costs. This often results in an inevitable failure to pay phone bills. In addition to being the result of sales tactics, payment defaults can also arise for other personal reasons or simply from forgetfulness.
What will negatively affect your credit score and for how long?
Default values
When you have made a late payment for an invoice over $ 150 and it is more than 60 days past due, it is considered a default. In addition, the service providers would have made efforts to contact you in order to collect the unpaid debt.
Failure to pay over the phone will not only prevent you from applying for other phone plans in the near future, but it will also affect your ability to get approved for a home loan or credit card, negatively affecting your credit score. However, before the credit provider listed your arrears with the credit reporting agency, they should have taken steps to collect your payment along with a written notice specifying their intention to list it.
Bankruptcies and court judgments
A defect will remain on your file for a period of five years. During this period, if you repay the debt, it will be recorded, but if you don’t, the default will remain. In fact, if there is a court judgment or bankruptcy, it will make matters worse. In addition, bankruptcy will be registered for five years from the date you filed for bankruptcy or two years from the date your bankruptcy ends, whichever is later.
Late payments
If you simply forgot to pay a bill, that will show up on your credit score as well, even if you manage to pay the bill before it becomes a default.
What will positively affect your credit score?
All is not catastrophic with your phone plans and your credit score. You can have a positive impact on your credit score by doing the following:
Good payment history
If you have a one-time payment history over the phone, it will have a positive impact on your credit score.
Type of credit facility
The more information you provide regarding your cell phone bills or other utility bills, the better it will be for any lender you approach to clearly understand your financial situation.
Prepaid mobile and broadband plans
One option to avoid ending up in the loop of late or non-payment of phone bills is to stick with prepaid mobile and broadband plans. Nowadays, there are several competitive prepaid choices and plans in the market, where you can easily prepay what you need for the month.
