Despite what you may have heard, your cell phone payment history DOES affect your credit score.
Cell phone accounts work differently than a credit card or a line of credit. A cell phone is an open or “O” account, which means the balance has to be paid in full at the end of each month.
There is no such thing as a minimum payment with an “O” account like there is with credit cards and lines of credit. You can’t just pay a portion of your bill. The amount that you see on your statement has to be paid in full otherwise your credit score will suffer.
Unfortunately, many Canadians don’t view paying their cell phone bill in full or on time as being as important as other payments. Lenders disagree. The bank underwriters (the people who review your file) are thinking, “If you can’t make or keep track of a cell phone payment, what are the chances that you are going to be responsible with your mortgage payment?”
Late payments will continue to be recorded until your account is caught up. Underwriters will look at an applicant with an outstanding balance as someone who is not in control of their finances. It will drop your score and hurt your chances of being approved for the best rates and terms.
If you have paid out or closed your cell phone account, make sure you get something in writing to confirm that there is no outstanding balance owing.
To improve your chances of avoiding any issues, ensure you pay the full amount owing each month and keep good records.
If you have any questions on credit, I’m happy to chat!
Tatum Neufeld, BComm
Mortgage Broker • Mortgage Tailors