Credit Score

Is Your Cellphone Ruining Your Credit?

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The phone is a useful and essential tool in our lives — and it’s even more useful now that nearly everyone carries around their own smartphone or cellphone. In fact, these phones have become more than just ways to talk to someone; they are communication hubs and entertainment systems and life management tools.

Unfortunately, they can also negatively affect your life by hurting (and even ruining) your credit if used incorrectly. Here are three ways that your phone could harm your credit score.

If you don’t pay your bill. Your phone bill may not be reported to the credit bureaus on a monthly basis like your credit card bill is, but if you don’t pay your bill, your service provider may send your bill to collections. A collection account on your credit report will impact your credit score, unless the credit scoring model being used is the new VantageScore 3.0, which doesn’t include paid collection accounts in its model.

If you leave your financial information on your phone. Many mobile devices today are for more than just talking. There are apps for financial institutions and payment methods, and new technology suggests that our mobile devices may completely replace the cards in our wallet in the very near future.

How often have you left your phone somewhere? Millions of phones are temporarily misplaced or completely lost every year, and if those phones fall into the wrong hands, someone could gain access to your bank, your investment accounts, your credit cards, Paypal and more. If an identity thief gets a hold of your phone and racks up charges without paying them, this could have a signifiant impact on your credit. Watch your phone carefully and consider downloading an app that allows you to remotely wipe your phone’s memory if you lose it.

If you’re avoiding debt collectors’ calls. Although we all know we should pay our bills on time and in full, it sometimes doesn’t happen. Life gets in the way and for whatever reason, some bills may end up with a debt collector. When that happens, one of the worse things you can do is avoid their calls.

Most debt collectors call because they want to work out a plan for you to repay. So answer their call and work with them to put together a payment plan because the sooner you can pay off that overdue debt, the sooner your credit report will reflect the positive changes.

Your phone is probably something you never leave the house without. It’s an essential tool for life. But if you’re not careful, it can also cause extreme difficulty by harming your credit history and dragging down your credit score.

Image: iStockphoto

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  • Steve Ely

    Jeanne’s right – in the past your cell phone bill (if gone unpaid) could only hurt your credit, since cell phone providers don’t typically report your positive payment history to the national credit reporting agencies. eCredable is changing the game, by allowing you to get “credit” for paying your cell phone bill on time (along with other bills like rent, utilities, and insurance). If you don’t have enough traditional credit history to produce a traditional credit score, try alternative credit. (Full Disclosure – I’m the CEO of eCredable).

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  • Trevor Duncan

    Thank you for the insights! Having a password on your phone is a good idea for these reasons. Also, having prepaid service allows the flexibility of changing one’s plan month to month without the hassle of a never-ending contract. Many companies are paying great prices for used smartphones, allowing the consumer to recoop some of the costs lost in owning a cell phone.

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