How mobile bill payments affect your credit scores

Photo by Luke Porter from Unsplash

The thought of credit scores may bring to mind car loans, lines of credit, mortgages and, of course, our beloved wallet-busting credit cards. Many people may not realize that in addition to these familiar credit account types, cellphone providers can report account data to credit reporting agencies—also called credit bureaus—in Canada. This means that how you manage your cellphone accounts can have an impact on your credit scores.

Credit scores and social media

Before you start wondering how your social media habits might affect your credit scores, let’s be clear that the information sent to credit reporting agencies pertains only to your account billing and payment information, and is shared only with credit reporting agencies in accordance with the applicable laws and regulations. Similar to your other credit accounts, the data reported by your cell phone provider generally includes the date you opened the account, the account balance and your payment history. This information is maintained on your consumer credit reports at each credit bureau.

Texting your way to a better credit score

There can be some real benefits to having your cellphone account information on your credit reports. For many people who are trying to build and establish a solid credit history, including young adults and people who are new to Canada, cellphones may be one of their first credit accounts. Working towards a strong credit history is an important part of “adulting.” However, like many other aspects of adulting, there is a flip side to this coin. People with missing or late payments on these accounts may see a decrease in their credit scores, as payment history is one of the biggest factors in credit score calculations.

How do prepaid accounts fit in?

Much like the prepaid credit cards near the cashier at large grocery stores and pharmacies, prepaid cell phone account payment history are not reported to credit bureaus. If you are buying top-up cards or loading money on your account in order to use your cell phone, it is not likely that the account will be on your credit reports. Typically, only accounts with service contracts will appear on credit reports. Similarly, a credit check is generally not required to initiate a new prepaid account, whereas a credit check is a common step in the process of activating a new service contract.

What is “alternative” about cell phone data?

We are often struck by how much credit misinformation circulates in Canada, based on U.S.-focused media reports. If you find yourself reading information online after an unintentional Internet “border crossing,” you may see that cell phone data is sometimes called “alternative data” in credit score lingo. Here’s why: one of the key differences between the Canadian and American credit ecosystems is that American cell phone providers do not generally report customers’ account data to U.S. credit bureaus. Some U.S.-based reports about credit scores are emerging, which reference the use of “alternative data” such as cell phone records pulled from sources other than credit bureaus. For what it’s worth, cell phone data is not considered “alternative” in Canada since it is already reported to Canadian credit bureaus.

Things to keep in mind

Some cell phone service providers in Canada may not report to credit bureaus. One way to check whether your service provider is reporting your account details is to get a free copy of your credit report. While you’re at it, double check the other information on your credit report. Not only is it a good opportunity to look for signs of identity theft, it’s another item to check off your list of financial to-dos. Before you hesitate due to some other misinformation out there, it’s time to bust a common myth: Getting a copy of your own credit report will not affect your credit scores. Another frequently misunderstood aspect of credit scores is that each of us doesn’t have just one: There are many of them. Lenders, credit card issuers and other organizations that can access credit reports don’t all use the same score version. The factors in the score calculations are generally the same; however, the weight of each factor—and even the data—included can vary. Even if there is information about your cell phone account on your credit report, that data is not necessarily included in the score calculation your lender will use on your next credit application. We know. No one said the credit ecosystem is simple.

The bottom line

We’ve told you that you may or may not see information from your cell phone provider on your credit report—and even if you do, it may or may not be included in a credit score calculation. The takeaway here is that your payment history for these services could help, or hinder, your credit scores. Our two cents? It’s worth making all your payments on time, every time. That will go a long way towards achieving and maintaining a solid credit standing. Your future self will thank you for it. Julie Kuzmic is Director of Consumer Advocacy at Equifax Canada and a recognized authority on consumer credit. She often speaks to industry groups, government, clients and consumers to shed light on the credit lifecycle. She is passionate about financial literacy and is always testing out new metaphors to describe the nuances of credit scores. For more educational information from Equifax Canada, including legal details, click here.