Why borrowers should pay their phone bills on time

Borrowers who wish to score a great mortgage deal should make sure that their phone bills are settled regularly, a market watcher said.

In a think piece on Canadian Mortgage Trends, market watcher Richard Moxley said cell phone payment history affects borrowers’ credit scores Therefore, a missed or insufficient monthly payment would reflect poorly and could cost them their mortgage deals.

Moxley said phone accounts are considered "open accounts” — unlike credit cards that have minimum payment requirements, phone bills have to be paid in full every month.

"Unfortunately, many Canadians don't view paying their cell phone bill in full or on time as being as important as other payments," he said.

Borrowers should take note that late payments, especially for open accounts like mobile plans, would be recorded as unfavourable until everything is settled.

"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 best rates and terms," Moxley said.

Also read: Improving your credit score

Even one late payment could hurt a borrower's chances of getting the ideal rate for a home loan, he said.

But what if a borrower refuses to pay for a phone bill because of a mistake? Moxley said despite disputing the charge, an affected borrower would still see a negative mark on his or her credit report.

"If you find yourself in this situation, my suggestion is to clear the amount owing first, and then dispute the charges. That way it doesn't lower your score or cause you to get charged higher rates just because of one account," Moxley said.

Having no outstanding balance is key to ensuring credit scores are in top condition, Moxley said. This is why borrowers need to make an extra effort to check their credit reports regularly.

"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. The same goes for an outstanding amount or settled collection. Don't take anyone's word for it or assume that it will be updated on your credit report," Moxley said.

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