The bills that are reported to the national credit bureaus are the ones that have an impact on your credit scores. This includes consumer debts and unpaid bills turned over to collections. Eligible recurring payments may also improve credit scores based on your Experian credit report if you use Experian Boost.
Credit scores are only impacted by a bill’s payment information being reported to the national credit bureaus, regardless of whether the bill was paid in full and within 30 days of its due date. In the past, there were only two main types of bills that met that criteria: consumer debt (such as installment loans and credit card payments) and past-due bills that were turned over to collections.
A third category of bills that can affect credit scores thanks to Experian Boost®ø are those that have eligible recurring payments that aren’t related to credit, such as bills for rent, utilities, insurance, and cellphones, as well as bills for streaming services.
The short answer is: It depends. Paying bills with a credit card can boost your credit score by demonstrating responsible credit usage and increasing your credit utilization ratio. However, if you’re not careful, it can also hurt your score if you miss payments or rack up high balances.
Here’s the breakdown:
Benefits of Paying Bills with a Credit Card:
- Builds credit history: If you’re new to credit, using a credit card to pay bills can help you establish a positive payment history, which is a key factor in your credit score.
- Increases credit utilization ratio: Your credit utilization ratio is the amount of credit you’re using compared to your total available credit. Keeping this ratio low (ideally below 30%) is important for a good credit score. Paying bills with a credit card can help you keep your utilization low, as long as you pay off your balance in full each month.
- Earns rewards: Many credit cards offer rewards programs that give you points, miles, or cash back for every dollar you spend. Paying bills with a credit card can help you rack up rewards that you can redeem for valuable perks.
- Convenience: Paying bills with a credit card can be more convenient than writing checks or using online banking. You can often set up automatic payments to ensure you never miss a due date.
Risks of Paying Bills with a Credit Card:
- Interest charges: If you don’t pay off your credit card balance in full each month, you’ll be charged interest, which can add up quickly and negate any rewards you earn.
- Late fees: Missing a payment can result in late fees, which can hurt your credit score.
- Overspending: Using a credit card to pay bills can make it easier to overspend, especially if you’re not careful about tracking your expenses.
Here are some tips for paying bills with a credit card safely and responsibly:
- Only use a credit card that you can afford to pay off in full each month. This will help you avoid interest charges and keep your credit utilization ratio low.
- Set up automatic payments to ensure you never miss a due date. This will help you avoid late fees and keep your credit score in good shape.
- Track your spending carefully. Make sure you’re not overspending just because you’re using a credit card to pay bills.
- Choose a credit card that offers rewards for the types of bills you pay most often. This will help you maximize your rewards.
The choice to use a credit card for bill payment is ultimately a personal one. Weigh the benefits and risks carefully before making a decision.
Here are some additional resources that you may find helpful:
- Experian: What Kinds of Bills Affect Credit Scores?
- Credit Karma: Paying Bills with a Credit Card: Good or Bad?
What Else Affects Your Credit Scores?
The most important factor affecting your credit scores is your payment history, which accounts for roughly 33.5 percent of your FICO%C2%AE%20Score. Other factors that affect credit scores include:
- Credit usage: The amount of credit that is available to you and the percentage of it that you use account for approximately 20-30% of your FICO%C2%AE%20Score. Improving your credit score can be facilitated by maintaining a low credit utilization ratio, which is the percentage of available credit you use on revolving credit accounts like credit cards.
- Experience managing credit: A lender will consider a borrower’s history of credit handling as an indication of their creditworthiness. Credit scoring systems calculate this by applying a factor called the account age, which accounts for approximately 2015% of your FICO%C2%AE%20Score.
- Variety of accounts: Lenders value borrowers who are able to manage several debts concurrently, such as a mix of revolving credit and installment loans. This is added up in a factor known as the credit mix, which accounts for roughly 2010% of your score (the FICO%C2%AE%20Score).
- Recent credit: Credit scores usually decrease slightly when a person applies for a new loan or credit account and takes on new debt, as these actions may indicate or result in financial distress. If you continue to make all of your payments, they will usually recover in a matter of months. About 2010% of your FICO%C2%AE%20Score is determined by your new credit activity.
- Serious negative events: Your credit scores may be severely impacted by negative credit report entries, such as collections and bankruptcies, which only show up if you’ve had a serious accident or committed a big mistake. For example, a Chapter 7 bankruptcy may affect your ability to obtain new credit for most or all of the ten years that it is listed on your credit report.
Historically, only debt-related payments and information influenced your credit scores. Now, however, certain other monthly bill payments could also help your credit scores powered by Experian.
Ultimately, your ability to balance debt repayment is most clearly reflected in the strength of your credit scores. You can identify areas for improvement by obtaining a free credit report and credit score if you intend to apply for new credit or if you would just like to know where you stand.
How to Get Credit for Your Bills
Experian Boost lets you add your history of certain eligible household bill payments to your Experian credit file. Doing so could help improve your FICO® Score☉ based on Experian credit data.
You have the option to select which bills you want to share payment history with Experian Boost, which adds up to two years of payment history to your Experian credit report. The types of bills you could add include:
- Phone bills (mobile and landline)
- Utility bills (gas, water, electricity and solar)
- Insurance (excluding health insurance)
- Residential rent (if paid online)
- Internet, cable and satellite bills
- Video streaming subscriptions
- Trash collection services
By ignoring late payments and only taking into account on-time payments, Experian Boost is a free tool that won’t lower your FICO® Score. Your FICO® Score 8 will be affected as soon as you share new payment information through Experian Boost.
BEST Day to Pay your Credit Card Bill (Increase Credit Score)
FAQ
Does paying credit card bill affect credit score?
Should you pay bills with credit card to build credit?
Does your credit score go up when you pay bills?
Does using your credit card a lot hurt your credit score?
Does paying off credit card debt affect your credit score?
Paying off credit card debt is smart, whether you zero out your balance every month or are finally done paying down debt after months or years. And as you might expect, it will affect your credit score. Whether you are chipping away at a balance or eliminating it with one big payment, your score will likely go up.
Do unpaid bills affect your credit score?
Collections can include any unpaid bills, not just those related to loans or credit, and, as you’d expect, they tend to hurt your credit scores. Now, you can also include eligible non-credit monthly bill payments, such as utilities, rent and insurance, on your Experian credit report to help your credit scores based on Experian data.
Do recurring bills affect your credit score?
As with other recurring bills, however, if you put them on a credit card and pay on time, that builds a good payment history and helps your score. Failure to pay can result in your account going to collections. Collections are reported to credit bureaus and can badly damage your score.
Do credit cards affect your credit score?
Credit cards can make paying bills and covering everyday expenses considerably more convenient, but they can also create problems if not paid in full. There’s generally no benefit to carrying a balance when it comes to your credit score.