Anyway, I’ve just started to live on my own, and as a result I don’t have a credit rating. I’ve been harped at about the benefits of a good credit rating for a long time, and the importance of building a good credit rating by paying your bills on time, etc.
But here’s the problem. I don’t want to pay my bills on time each month, I want to just send a cheque to the phone companies for what I think the next 8 months will cost, and ignore the bill payment thing. ** Technically, my bills are paid, but does prepaying your bills count as paying on time, and therefore building your credit rating?**
The purpose (I’m told) of a credit rating is to show that you are mature, responsible, and able to make payments on time. But I’m prepaying because I’m sure I’d forget, make late payments, etc. Will the [whoever does credit ratings] know that that is why some people prepay, and just pretend that I didn’t have a phone bill to pay, or will my phone bill be shown as a good thing on a credit rating?
Would it be better for my credit rating if I sent a cheque to the phone company each month, or will it work out the same if I prepay?
You could get a credit card, set it up to automatically deduct the minimum payment from your checking account each month on the due date, and then set up your phone/cable/utility bills to automatically deduct each month from your credit card. Now you could also have the companies deduct automatically from your checking account as well, BUT each one will create one entry on your credit report. Having them go through a CC first will create another entry for the CC as well. Having everything automatically deduct will assure you that you won’t make a late payment. However you’ll still have to be careful that you have enough in your checking account to cover the deductions as well as a high enough credit limit to make sure you don’t go over that. Also you’ll still want to make sure that you make an additional payment on your CC, if you just let the minimum deduct each month you’re sure to be in over your head eventually. The choice is yours. BTW I guess this really doesn’t answer the OP. I suppose of the phone co let’s you send them a check for, say, $500 it will just show as a credit that they will draw off of each month. That should show positivley on your credit report since you won’t miss a payment. Just make sure they don’t send you a check back for the difference since you’ll be overpaying by sooo much, and make sure you pay attention and send them a new check when it starts to run down. One last thing, I would first call them and ask what they would do if you sent them such a large check.
Yes, paying your bills ahead of time counts as being on time…except
Some places, and your phone company may be one of them (mine is) is under a state regulator’s rules to refund overages over a certain amount.
But in terms of bad credit, it’s not whether you made payments, per se, but whether you missed payments that gets recorded.
Plus whether the account was active at all!
I had a half dozen store charge accounts (much easier to open) that I used before I qualified for a Visa card. Once I got the Visa, I switched to using that and paid off all the others.
A year later I wanted another Visa card because it had a lower rate and offered to charge me no interest on transferred balances from the first card. What a deal.
But the credit request was declined because “you have too many accounts with 0 balances”.
See, they not only want to make sure you can pay, but also that you are actually going to keep a running balance. That’s where the profit is for them- there’s no profit if you pay it down every month.
So, you can’t really win on credit. “The best-laid plans of mice and men gang aft agley.”
I would check with the individual utilities and see what exactly they report to credit bureaus. IINM, some utilities only report on you if you’re late or don’t pay, but never report when you’re behaving and paying your bills on time. So if you pay in advance, nothing good or bad may be reported.
CC companies on the other hand, report on you both when you’re being good and being bad. So prepaying would probably show up as “current” or “in good standing.”
However, CC companies want you to have a balance on which you’re paying them interest. So pre-paying them won’t make them happy with you. They can’t leave a nasty note on your credit report saying “this jerk never pays us interest!” But, they could conceivably dump you eventually because you aren’t making them any money. Sorry, no cite for that, but I did read something about that in a newspaper, and not just “from a friend.”
Utilities have almost no effect on credit ratings. Only going into collections will impact your credit rating. Usually, utilities are not part of a report (but collection agencies are).
You need some sort of loan, student loan, credit card or dept. store card.
And you should carry some type of balance that needs to be paid off. Usually, paying everything early, not carrying balances and never carrying a loan will result in a poor rating, or a lackluster one. Why? Well, a credit history is a reference to proof that you are capable of paying off a debt over time. Forget the philosophical arguments, and remember that to maximize your rating, you need some loans and to carry some balances.
Phases of credit:
checking acc’t
student loan
dept store credit
major credit card
personal/auto loan
mortgage
equity loans
I pre-pay the utilities all the time, just because I’m too lazy to pay more bills than I absolutely have to every month. You still have to open your bills to be sure you’re still running a credit, but at least you won’t be missing payments. I don’t think it will make much of a difference as far as your credit rating goes, though – as other posters have said, that tends to be affected only when you miss payments.
Right- what Philster said. Although Phil and I some times disagree on the subject of Credit Reports, he’s 100% correct here.
Oh, and just for grins & giggles- get a copy of your credit report anyway. There may be stuff there already- and it could be wrong, and it could be bad.