Why cell phone payments don't help your credit

Dear Credit Score Report,I have a cell phone with Verizon Wireless. I pay my bill every month on time. Why isn't my good payment record reported by Verizon on my credit report? They are advancing me credit each month in the form of cell phone minutes and air time. If I miss a payment and the account goes delinquent, I'm pretty sure they will report the negative information. Why not give positive payment info as well? Are there any cell phone companies that do report your payment records to Equifax, Experian and TransUnion? -- Gloria 

Hey Gloria,Neither your on-time Verizon cell phone payments nor any slightly late or stand-alone missed payments will appear on your credit report for the same reason: Verizon only reports mobile phone accounts to the credit bureaus once payments are so late that the account has been closed.

"We report only charged-off or written-off accounts," says Verizon spokeswoman Nancy Stark. "We don't report positive or negative account activity." She says that's because certain parts of Verizon's business are governed by state laws that prevent them from reporting active account information. So, for simplicity's sake, Verizon opted to apply that same standard consistently across its entire business -- including its cell phone division. 

Although you make a good point about cell phone minutes basically acting in the same way as credit extended by banks, Verizon's practice isn't unusual. Exceptions do exist, but generally, "if you pull a credit report, you won't see non-traditional data, including cell phone, utility and cable" payments, says Norm Magnuson, vice president of public affairs with the Consumer Data Industry Association trade group, whose members include major credit bureaus Equifax, Experian and TransUnion. 

Calls to many of the nation's top wireless carriers bear that out. Each individual carrier can determine which customers they report and under what circumstances, experts say, but I wasn't able to identify any that report your on-time payments to the credit bureaus. For example, Sprint said it reports active accounts to an industry database, not a credit bureau, while suspended Sprint accounts are sent to outside collection agencies, which, in turn, report to the credit bureaus. Although some experts have indicated that AT&T does report some information to the credit bureaus, the company was unwilling to discuss its policy. T-Mobile didn't respond to requests for comment.

Verizon's policy is clear, however. In your case, Gloria, you shouldn't have to worry about a late payment damaging your credit score. Your credit score will only take a hit if you fail to make payments for so long that Verizon opts to close your account. Before that happens, though, Verizon says it will contact you, giving you a chance to make good on your bill. If unsuccessful in collecting a remaining account balance, Verizon will then report the account to all three credit bureaus.

How many months of non-payment will lead to cancellation? The CDIA's Magnuson says, in general, lenders may turn over unpaid accounts to outside collection agencies after three to six months of non-payment. However, Stark says Verizon has no set length of time for making such a move, so each individual case may vary. She says the timing of an account closure depends on a number of factors, including:

  • The customer's payment history.
  • The age of the account.
  • Any consumer promises regarding partial payment.

For example, being a long-standing Verizon customer with a record of on-time payments would probably mean you have more time to make good on missed or late payments if you suddenly stopped paying. It may also help if you offer to at least make a partial payment.

The fact that cell phone providers don't report on-time payments means a significant number of consumers' credit records aren't benefitting from their responsible behavior. While just 11 percent of the United States population doesn't use cell phones, according to the International Association for the Wireless Telecommunications Industry, a more sizable 18 percent (or 55 million people) don't have credit reports, according to the CDIA. That information gap could cost these millions of consumers the ability to qualify for a credit card, mortgage or even a cell phone contract, since providers often consider credit scores before supplying consumers with minutes.  

While no wireless providers currently report full-file information to the credit bureaus, the Fair Credit Reporting Act (FCRA) "provides a regulatory framework in which providers could report positive and negative customer payment information," says Bill Parrish, vice president of telecommunications, energy and cable with Experian Information Solutions. "Most importantly, studies by PERC (the Policy and Economic Research Council) have found that full-file reporting is mutually beneficial to both the consumer and business."

"Across the landscape, it's generally not available now, but that's not to say, down the road, it couldn't be," says Magnuson.

But for now, Gloria, keep making those payments to Verizon. If you do that, while making good use of any credit you have -- including always paying on time and keeping your balances as low as possible -- your credit score should be just fine.

Good luck.

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