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Which Bills Affect Your Credit Score?

Managing Your Finances

A Good Credit Score is Important for Military Officers

As a young military officer, it is important that you establish a good credit score.  It can make a difference when it comes to obtaining high-level clearances and ultimately your competitiveness for promotion (if you can't get the clearance for a position, that will definitely slow you down).  And now DoD will "continuously" monitor your financial status if you have a security clearance, so it becomes even more important to keep your credit score "healthy" all the time. 

Few officers are aware that when it comes to your credit score, doing the right thing doesn’t always help. Certain bills that you pay on time, like utilities and telephone bills, actually don’t help your credit score. However, if you fall behind and the company extending you credit reports your negative status, your credit score will go down. According to a survey conducted by the TransUnion credit reporting agency online, just under half believed that their rent payments were regularly reported to credit monitoring businesses.1 So then, which bills will affect a credit score?

Why Some Bills Affect Your Credit Score and Others Don’t

The difference between bills or payments that affect a credit score and those that don’t depend on whether the payment pays off a loan some lender extended to you or the bill is a payment for a service. Banks regularly report payments to credit reporting agencies. The practice helps lenders determine your creditworthiness, whether you will be a good risk if you are asking to borrow money to purchase a car or home. Some services also use credit reporting agencies to determine whether it will be safe to enter into a long-term contractual agreement with you like a monthly cable or telephone service.

The practice of reporting to credit agencies is expensive. It costs money to gather the information and to make the report. Lending institutions have been in the business of the exchange of this information and it is built into the practice. That is not the case for service industries or the rental housing industry. Moreover, there is no federal regulation or law that demands that businesses report the timeliness of your payments to a credit reporting agency.

Another issue with businesses making the reports to credit reporting agencies is that it will expose them to a law called the Fair Credit Reporting Act (FCRA). The business can request a credit report under the FCRA if there is a “legitimate business need” based on a transaction that you initiate. However, the business will have to follow the rules of the Act and provide notice to the consumer that they pulled your credit report.

There is a sound business reason for looking at your credit report for some businesses like a cell phone company. However, there is no benefit to the business to report timely payments, so they don’t incur the costs of making those reports.

But remember, service providers such as these along with lending institutions will report if you don’t pay your bills at all. They will report if they have to hire a collection agency to collect payment from you after they have discontinued providing you the service or they have repossessed whatever you used to buy with the loan.

And remember, as alluded to above, the military will pull a credit report on you when they investigate you for a security clearance and "continuously" monitor your finances if you have a security clearance.  A poor credit score could indicate that you have problems managing your finances.  If your score is too low, you may be denied or lose the clearance...especially the higher level ones.

Helping or Hurting Your Credit Score

So, which monthly expenditures or expenses will affect your credit score? The answer is all of them, if you don’t pay them at all. If you are wondering which ones can help your credit score if you pay on time, they include loans like:

  • Mortgage payments
  • Student loans
  • Auto loans

The bills that won’t help your credit score include:

  • Utility bills
  • Apartment rent
  • Club memberships
  • Subscriptions

If you are worried about your credit score, good planning can help. Talk to a financial advisor, such as an Accredited Financial Counselor (AFC), if you are planning to take out a substantial loan or will go through a background investigation for a security clearance and you have concerns that your credit score will make a difference.

1 https://newsroom.transunion.com/what-actually-affects-your-credit-score--transunion-survey-reveals-consumer-confusion/


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