Your credit score is one of the most important financial numbers in your life. Financial institutions use it to determine whether you qualify for a loan or a credit card, as well as your interest rate. Your score can also determine how much you pay for your insurance premiums and many employers and landlords pull your credit as part of the screening process.
With so much at stake, it is important to constantly maintain a good credit score. There are three different major credit reporting agencies — Experian®, TransUnion® and Equifax® — that maintain a record of your credit history. This is also known as your credit report. Your FICO Score (Fair Isaac Corporation) is based on the information in your credit report and consists of the following:
- 35% Record of paying bills on time
- 30% Amount owed
- 15% Credit history
- 10% Credit mix
- 10% Recent credit inquiries
In order to get a FICO score, you will need six months of credit history to assess your creditworthiness. The most common bills that count toward your credit score are credit cards, car loans, student loans, and mortgages. Typically, your payments for your cell phone, utilities, and other monthly payments that you make do not impact your credit score. So if you have limited credit history or don’t have any loans or credit cards, how can you improve your score?
Get credit for regular monthly bills
Experian, one of the three credit bureaus, has recently launched a program called Experian Boost. It can give you credit for making payments for your phone bills, utilities, and certain streaming services. The service is free and to get started, you connect the bank account you use to pay your bills to Experian Boost. If you already have an account with Experian, you can add this service under Reports and Scores.
Experian then searches your bank transactions to find on-time qualifying payments to add to your Experian credit file. Popular bills that work with Experian Boost are Netflix, Disney Plus, Hulu, HBO, AT&T, Spectrum, and Verizon. You must make payments using your bank account. Bills need at least three months of payments within a six month window to qualify for Experian Boost. The service does not count payments made with a credit card.
By adding the payment history for these types of bills, you are able to build a positive payment history. Since payment history is the biggest factor in determining your credit score, these records can help boost your credit instantly. Experian Boost only uses on-time payment histories on these accounts, so late payments will not lower your credit score. Another factor that determines your credit score is the length of your credit history. These additional accounts can improve your score by showing more proof of active accounts and positive payment history. So far, over 4 million Americans have used this service.