Bill Pay and Credit: Everything You Need to Know

Bill Pay and Credit: Everything You Need to Know

People lead busy lives, and paying bills is just one more thing that gets put off until the last minute. No one likes paying bills, but we all grit our teeth and do it… eventually.

Unfortunately, paying bills on time is a lot more important than people realize.

Paying bills may seem like a mundane task, but it can make or break your credit score, affecting you for years to come. A bad credit score can prevent you from getting a loan you need, buying a home, or simply getting good rates on down-payments for utilities.

When done correctly, however, good bill-pay habits can help you establish a strong foundation for financial success. Payment history affects 35% of your credit score, so it’s a big part of building good credit. Consistent, on-time bill payments can help you maintain good credit, or even improve your credit when you need to. Managing your bill pay in a streamlined way also reduces the stress caused by bills piling up, late fees, and debt that could have been avoided.

Read on for everything you’ve ever needed to know about paying bills and your credit, and how to improve the bill paying process.

Which Bills Affect Your Credit

When it comes to paying bills, most people don’t actually know which bills affect their credit and which ones don’t. The tricky part is, not very many monthly bills will help improve your credit. But, virtually any bill that’s late will be reported and bring your score down.

As a rule of thumb, any time a bank extends you a line of credit, the payments you make will be reported to credit bureaus. Examples of bill payments that are regularly reported to credit bureaus are:

  • Credit cards
  • Car loans
  • Student loans
  • Mortgage payments

For everything else, your good payments won’t be a part of your payment history … Unless you pay them late.

The Cost of Late Bill Payments

When you pay a bill late, there are a lot of negative consequences that could occur. Here are just a few:

  1. You’ll get hit with costly late fees.

Whether it’s a late payment on your electricity, rent, car payment, or gym membership, you’re going to get hit with extra fees. You can expect at least $25 to be added to any given bill, which will probably increase as more time goes by.

  1. It could lower your credit score.

Although utility companies and other monthly bills can’t directly impact your credit, they’ll send your late payments to a company who can. Eventually, all late bills are sent to collections agencies. When this happens, the collections agency will report the incident to all three major credit bureaus and bring down your credit score.

  1. It can increase your interest rates on credit cards.

If your credit card payment is more than 60 days late, you could end up with something called a penalty APR. This is an extremely costly interest rate that could be as high as 29.99%, forcing you to eventually spend more money. Not only can they apply this penalty rate to your delinquent payment, but to any new purchases you make for months to come.

Late bill payments are a terrible habit that can snowball into debt and more financial stress. For these reasons and many more, paying bills on time should be one of your top financial priorities. The good news is, it can all be done for you.

Make Paying Bills Work to Your Advantage

When done correctly, paying bills can actually help you, not hurt you. With good bill paying habits and some smart money moves, you can use bills to your advantage.

Pay bills on time

Automating monthly bills is by far the easiest way to ensure all your bills are paid on time, late fees are avoided, and your credit score remains untarnished. It allows you to “set it and forget it.” This will mean less work for you and more financial security when your bills are getting paid on time. To do so, you can set all your bills to “autopay” directly through each service provider. Just make sure that the card you use always has enough funds to cover your bills.

Build credit with monthly bills

If you need to build credit from scratch, or improve a bad credit score, there are a few ways you can use bill pay to help. Keep in mind, too, that continuing to pay all your bills on time will prevent your score from being damaged further.

To create an alternative credit score, you can use your monthly bills as proof of your creditworthiness through eCredable. On their website, you connect your monthly bills so they can view your payment history. Then, they’ll give you a score based on your bill paying habits. You can then use this score to help

You can also choose to have your good rental payments reported to credit bureaus. Normally, rent is one of the things that won’t be reported unless it’s late. If you choose to opt-in to have your rent reported, though, you can use your good payments to build credit.

By making on time payments and creating good financial habits, bill paying will help you maintain good credit. Paying bills can either be a hassle, or a way to improve your financial situation. 

It’s up to you.

Veronica Camara

Veronica Camara is a writer and content strategist from Austin, Texas. She is the Digital Content Manager at Billsley, an app that cuts costs on monthly bills – coming soon! Follow her on Twitter @vcamara512.


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