How Paying Bills Can Affect Your Credit Score (2024)

Late bills canaffect credit scoresin different ways because the credit reporting agencies – Experian, TransUnion, and Equifax – consider borrowing-related bills differently than other bills, like rent, utilities, and medical bills. One late payment on a credit card, personal or auto loan, or mortgage might have an immediate negative effect, though it would likely be small if it was only a single late payment. Consistent on-time payments for those credit-related bills helpsimprove your credit score.

But unless they become very late, everyday utility, cable, or cellphone bills are generally invisible to credit reports – and therefore not counted in yourcredit scoreat all. Meanwhile, late medical bill payments are often granted special considerations by credit agencies.

Let’s take a deeper dive into the various types of noncredit bills and how their late, missed, and on-time payments can impact your credit score.

If a renter is less than five days late paying their rent, it should be no big deal. After that, a landlord may charge a late fee of 5% to 10%. And when a rent payment is 30 days or more past due, they can choose to report that late payment to the credit bureaus.¹In general, one late payment could lower your score by up to 80 points if you have a high credit score, according to Fair Isaac Corp., provider of FICO.²Lower credit scores would lose fewer points from a single late payment because they already reflect a higher level of nonpayment risk, FICO notes.

If you’re late on one payment on a telecom bill – meaning, landline or mobile phone, internet, and cable TV – depending on the service provider, it probably won’t make any difference to your credit score. But missing multiple telecom payments – or neglecting an unpaid bill altogether – may negatively affect your credit score because your service provider might report the late or missed payments to one or more credit bureaus.

Much like telecom bills, utility bills like water, gas, and electric usually don’t surface on your credit reports unless you default. These utility bill payments typically affect your credit score most if you’ve missed so many payments that a service provider closes your account and transfers your debt to a collection agency to obtain payment, considers it uncollectible, or charges-off your account, concluding that you’re not going to pay the debt.

If those bills enter collection or are charged-off, they could affect your credit score unfavorably. If the collection agency opens a collections account in your name and sends a record of it to one or all of the three major credit bureaus, it will become part of your credit history. Missed payments, collections, repossession, and foreclosure are regarded as “derogatory marks” and stay on your credit file for seven years, even if you pay back the collection agency.³While some newer credit scoring models won’t factor paid collections accounts into credit score calculations, older models may – and most lenders commonly use older credit scoring models when making lending decisions.⁴

Medical bills get special consideration. Billing errors and insurance disputes, for example, can lead to late payments. In fact, according to aConsumer Reportssurvey of 1,000 adults who had at least one outstanding medical expense above $500 in a two-year span, 24% didn’t realize they owed the bill, 13% said they didn’t get the bill to begin with, and 10% said it was erroneously sent to collections despite having been paid.⁶Other circ*mstances, like large unexpected medical expenses, can also lead to account delinquency – even for people with excellent credit history.

But, it’s usually harder for past-due medical bills to hurt your credit score than for borrowing-related bills to do so. Instead of reporting delinquent bills to a credit bureau, health care providers send them to a collection agency, and then the information is reported to the bureaus – which takes time.

In fact, as of 2017, the three credit bureaus jointly agreed to wait 180 days before medical debt sent to a collection agency would appear on credit reports.⁷And as of July 1, 2022, the time period before unpaid medical collection debt would appear on a credit report increases to one year.⁸This extension gives consumers more time to make payments, establish payment arrangements with medical providers or insurance companies, and resolve any errors – especially because medical debt in collections is less predictive of future payment problems than other types of debt collections, according to the Consumer Financial Protection Bureau (CFPB).⁹

If you’re working out a coverage dispute with an insurer, it’s a good idea to inform the health care provider and ask them to delay reporting late or missed payments. In certain states, you can appeal an insurance denial and, in some cases, you can negotiate the payment amount.

No matter the cause, if no resolution is reached, it is possible for late medical bills to ruin your credit. How big a dent medical bills make in your credit score also depends on the credit scoring model being used.Consumer Reportsalso notes that if a lender uses FICO Score 9, then your medical debt will be weighed less than other debts. That’s thanks to FICO’s recognition of all the issues just described. But the most widely used credit scoring model is still FICO Score 8, which counts all debts equally.