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It's possible for your timely cellphone payments to help build your credit scores, thanks to a feature called Experian Boost®ø. The service can help relieve a classic Catch-22: You need a good credit score to borrow money at affordable rates, but you can't get a good credit score without an established credit history.
How to Improve Your Credit Score With Your Cellphone Bill
Recognizing that a pattern of timely cellphone payments is a mark of financial responsibility, Experian Boost allows you to add your cellphone payment history to your Experian credit report so it's visible to creditors and credit scoring models. If you choose, you can also share payment information for other recurring expenses, such as bills for utilities, cable, internet and streaming services. If you pay your rent online, you can add those payments too.
On-time payments reported through Experian Boost have a favorable influence on FICO® Scores based on Experian data. Here's how Experian Boost works:
- Start by sharing secure access to the checking accounts and/or credit cards you use to pay your bills.
- Identify and confirm the payments you want added to your Experian credit report.
- Check your FICO® Score based on Experian data and see the effects immediately.
You can add or remove accounts from Experian Boost anytime you like.
Why It's Important to Build Credit
When you're beginning to establish a credit history and have fewer than five accounts on your credit report, you have what's called a thin credit file. A thin file can limit the number of lenders willing to work with you and the amount of money you're able to borrow (or the credit limits you receive). It can also mean that if you find a lender to work with, you'll likely get charged higher interest rates than a borrower who has a lengthy record of on-time payments.
That's because lenders use statistical predictions—that's what credit scores are—to evaluate creditworthiness, and a thin credit file lacks sufficient data to be useful when making a reliable forecast. That makes you something of an unknown quantity to lenders and may mean a relatively low credit score. By adding solid payment data, such as your cellphone bill, Experian Boost can "thicken up" your Experian credit report and increase FICO® Scores calculated using Experian credit data. That can help you gain access to better loan and credit card offers and reduce the interest rates and fees lenders charge to work with you. Taking advantage of those opportunities, in turn, can further expand your credit history, which promotes steady growth in credit scores over time.
Additional Ways to Build Credit
Experian Boost can help you jump-start your credit history and raise your credit scores, but it's not the only way. If you're working on building your credit, you may want to consider some of these proven tactics as well:
- Secured credit card: A secured credit card requires you to make a cash deposit, typically a couple hundred dollars, which serves as the borrowing limit on the card. Making purchases with the card and paying your bills on time adds to your payment history and promotes credit score improvement.
- Retail credit card: Some stores have less restrictive credit requirements than other credit card issuers, so it may be easier to get an unsecured retail credit card than a major credit card. Using it wisely can build a positive payment history that elevates your credit scores. Retail cards often carry high interest rates, so paying your bill in full each month can save you money.
- Reliable cosigner: Enlisting a trustworthy (and trusting) person with good credit to cosign can help you qualify for a loan you couldn't otherwise get. Once you have the loan, making payments on time every month will help build your credit scores. Take this responsibility seriously, because your cosigner is just as responsible as you are for all payments, and any missed payments will hurt your co-signer's credit history as well as your own.
- Be an authorized user: Almost all credit card issuers let cardholders designate authorized users. As an authorized user on someone else's account, you get a card imprinted with your name, and the account and its activity should appear on your credit reports as long as you meet the issuer's minimum age requirement. (Make sure this is the case, as some card issuers may not automatically report authorized-user accounts to the national credit bureaus.) If the primary cardholder uses the card responsibly, your credit score can benefit.
- Secured loan: If you have a thin credit file, it may be easier to get a secured loan—one backed by collateral, such as an auto loan—than unsecured credit such as a personal loan or credit card. The option to seize the collateral if you don't repay makes the arrangement less risky for the lender. But if you make your payments on time every month, it'll promote credit score growth.
- Credit-builder loan: Offered by many credit unions, a credit-builder loan is a savings tool that can also help you build a credit payment history. You take out a small cash loan of, say, a few hundred dollars, but instead of handing you the cash, the lender places it in a savings account set up in your name. You get access to the account only after you repay the loan in a series of monthly payments that typically takes less than a year. (If you don't make your payments, the loan issuer keeps the money.) You pay interest on the loan, but at least some of that is typically offset by interest earned on the savings deposit. If you keep up with your payments, in the end you have some savings stored up, a series of positive payment entries on your credit reports, and a loan listed as paid in full.
The Bottom Line
Enrolling in Experian Boost is free and easy, and it can bring instant improvement to FICO® Scores based on your Experian credit data. If you're working on establishing or building your credit history and raising your credit scores, consider giving it a try.