Is your mobile bill hurting your credit score? Here’s what you need to know

A good credit score holds immense value in India while applying for credit cards and loans. While loan repayment and usage of credit cards form most of your credit scores, people often ask if they will remain creditworthy even if they settle bills such as their mobile bill. How is your mobile bill going to affect your credit score? Is there a relation between the two? This has been elaborated below in detail.

Now, to begin, it is important to clearly acknowledge that mobile bills do not directly add to your credit score in India. On-time payment of mobile bills can still positively reflect on your overall creditworthiness but will not be reflected in your credit score. It will also have no impact on your credit utilisation ratio.

Payments of credit card bills, loan EMIs, and other credit transactions are mainly taken into account by Indian credit information companies like CIRF High Mark, Experian, Equifax and CIBIL while determining credit scores.

Future developments in credit scoring

There are some other credit scoring models that are in the works and would take into account payment of bills related to utilities, such as mobile bills, for the purpose of determining creditworthiness. These models would be designed for providing credit scores to those individuals who do not have a traditional credit history. These models are currently getting evolved and are not yet rolled out on a mass scale in India.

What are the risks of unpaid bills?

Although timely payment of your cellular phone bills won't boost your credit score, bills for late payments will adversely impact your credit report or your credit score if they are forwarded to a collection agency. The amount that is in arrears can then show up on your credit report, and it will reduce your credit score. Eventually it is about how honest and sincere you are with regards to the repayment of the money or service you have loaned.

Therefore, to conclude your mobile bill has no impact on your credit score directly. Still, as a standard practice it is always prudent to ensure that there is no late payment due on your name so that you are not in a position to invite a hard enquiry on your credit profile and are provided an easy loan with least possible interest rate terms.

Maintaining a good credit score

To maintain a good credit score, focus on timely payments of credit card bills and loan EMIs. Ensure your credit utilisation ratio is below 30%, and avoid frequent credit enquiries. A high credit score, typically above 750, is considered excellent and increases your chances of securing loans and credit cards at favourable terms and lower interest rates.

Additional tips for credit health

Apart from the payment of bills against credit, it's also a good idea to review your credit report at consistent intervals so that it's updated and you can detect any possible discrepancies.

Further, generally you are entitled to receive a free credit report from credit reporting agencies once in a year. For more details on this and complete clarity you should consider reaching out to your respective credit rating agency. A long credit history and good diversity of different credits also help in raising your credit score. This way, you can have a healthy credit report and more financial opportunities.