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6 recurring expenses that don't help your credit score

Looking to give your credit score a boost? Here are six regular expenses that won't help you accomplish your objective even though you think they might.

By MSN Money Partner May 30, 2014 2:09PM

This post comes from Allison Martin at partner site Money Talks News. 


Money Talks News on MSN MoneyIsn't it ironic how you can have an excellent payment history, but poor credit?


Woman with paperwork © Getty ImagesYour credit score is one of the most prized possessions in your financial profile, and a low score can be very detrimental to your financial well-being when you need to borrow money. It doesn't help when you desperately want to improve your score, but are in the dark about how to move forward.


Here are six expenses that will not facilitate your efforts to build your FICO score, the score most commonly used by lenders:


1. Household expenses 

You'd think the opposite would be true because these companies usually require a credit check before they'll do business with you. It doesn’t matter if you make timely payments each month because the companies don't report to the three major credit bureaus.


However, there are exceptions: 

  • Rent. A broken lease that results in a judgment or an eviction may be reported to the credit bureaus and affect your FICO score.
  • Cable and utilities. Past-due bills will be reported to the credit bureaus if they remain unpaid after a substantial amount of time and/or the bill is sent to collections.
  • Cellphone. Some cellphone companies do report your regular payments. Breached contracts with an outstanding fee or a delinquent account that calls for termination can damage your credit score.

2. Support obligations

Are you required to provide monthly support to your children or former spouse? The credit bureaus likely don't know about that either.


However, fall far enough behind and your arrears will be reported to the credit bureaus if a state child support enforcement agency gets involved. Fail to pay and it can damage your credit score.


3. Tax payments 

Do you make property, state or federal tax payments during the year? If you pay on time, this information won't be reported either. But if a lien or wage garnishment results because you don't pay, it will show up on your credit report.


"(H)aving a (federal) tax lien on your credit report is a serious negative item and it could remain on your credit report for seven years after the tax bill is paid, unless you take steps to have it withdrawn," says Credit.com.


4. Contractual agreements with small or mid-sized companies

Paying for a monthly service? Your record of good payments won't be reported. If you stop paying, the company may simply stop providing the service and write off the delinquent account as a bad debt expense. But if they send the bill to a collection agency, that will hurt your score.


5. Insurance premiums 

Because premiums are usually paid in advance, health, auto, homeowners and life insurance companies don't typically report transactions to the credit bureaus either. If you don't pay, eventually they'll simply cancel the policy.


6. Medical bills 

Have you arranged a payment plan with your health care provider for the portion of bills not covered by health insurance? The balance and payment activity don't show up either, unless, of course, you're delinquent. Says Bankrate:

Your monthly payment to a doctor or hospital will not be reported, but failing to pay will result in the bill being sent to a collection agency. That agency may report the account to your credit bureaus. Some, albeit only a few, hospitals will assign the bill to a collection agency but advise the agency not to report the bill to your credit report. The collection agency will attempt to collect the debt but not create a negative mark on your credit report.
VantageScore 3.0 to the rescue

The VantageScore is a direct competitor of FICO, and calculates your alternative credit score using the following factors:

  • Payment history -- 40 percent.
  • Depth of credit -- 21 percent.
  • Utilization -- 20 percent.
  • Balances -- 11 percent.
  • Recent credit -- 5 percent.
  • Available credit -- 3 percent.

It ranges from 300 to 850, and requires little to no credit history to calculate a score. This is a benefit for those 64 million Americans without a traditional credit score. Says CNN Money:

Credit scoring company VantageScore is trying to shed light on this mysterious group with its newest scoring model, which it estimates can assess an additional 30 (million) to 35 million people who were previously unscoreable. It does this by looking at 24 months of credit history, rather than six months, and by considering alternative data like rent and utility payments and public records when available.

FICO also has a special mortgage credit score that reflects timely payment of rent and other obligations.


If you must apply for a loan, find out which credit score the lender is using.


More from Money Talks News

8Comments
May 30, 2014 11:33PM
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It sounds like all of these bills DO affect your credit score if you don't pay them, so this is not terribly useful advice.

May 30, 2014 4:06PM
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The recession is not over at all. The media has chosen to say that and is focusing on a bogus jobs number that looks better because we're adding tens of thousands to Disability payments and millions more giving up looking for work making the employment picture look better than it is.
Jun 2, 2014 3:42AM
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There is no such thing as a payment that increases your FICO score, the same could be said for credit card payments. Lack of payment decreases your score no matter what it's for as long as it's reported by the lender.

Your score will increase when you have a mix of credit used, low credit utilization and over time as your accounts age.

This article is pointless, if you want to learn about FICO scores you should read this: http://www.doctorofcredit.com/credit-scores/fico-score/
Jun 2, 2014 11:33AM
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Take the money....and run!!
Leave behind al the mumbo jumbo ....wake up in the morning and shake yourself of all restrains imposed on you by your bankers and all the "barnacles" attached to you like leaches over the yrs....Don't look back!!.....they need you...you do not need them!!
Jun 2, 2014 9:26AM
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Obviously this reporter has no clue.  My spouse was forced out at her firm at 62 and couldn't even get an interview with 30 years experience, a degree and 7 years as an office manager.  We are just kicked to the curb in involuntary retirement-doesn't matter if we can afford it, if you are white and mature there is no place for you if the Obama world.
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