It’s hard to believe that smartphones have only been around for the same time we have; just over a decade. Can you imagine life without them? How would we find the nearest Tim Horton’s or figure out if Home Depot was still open before these things came along?
A new smartphone has more than a million more times RAM memory than the Apollo 11 computer and over 100,000 times more processing power! It’s amazing the technology shift in just 50 years.
But carrying around what would have been considered a supercomputer in your pocket even 20 years ago comes with a price. And, not paying that monthly price will cost you more than interest—it could be costing you your new home.
Cell Phones Are Liabilities
The latest iPhone retails for over $1,000 but most of us don’t think of these devices this way. They’re a $79/month contract that you signed for the next three years.
Do you remember signing off for the cell company to review your credit when you got your latest phone? We do, but we’re kind of geeks that way when it comes to companies checking our credit. Most people don’t realize that to get that new device, the service provider needs to make sure you’re good for it.
Cell phone contracts are a liability on your credit score. That $1,000 cell phone you walked out of Best Buy with today is reported as a debt on your credit bureau. But more importantly, the phone company is reporting every month on whether you have made your payment on time.
Pay Your Bills On Time, Every Time
What’s the worst payment history we typically see on credit scores? You guessed it—cell phone bills.
We’re not sure why this is the case. It could be many clients don’t consider a cell phone a debt or just hate the big service providers as much as our national airlines or, dare we say it, the big banks. But not paying this bill on time has become a problem for many of our clients. When it’s not paid on time more than a couple of times over several years, it’s going to affect your credit score.
The difference between a good and bad credit score could vary your rate by up to two percent, impacting your buying power. Your credit score is considered the Holy Grail when helping you obtain financing for a mortgage.
We hate to sound like a nagging parent, but please pay your cell phone bill, and every bill for that matter, each month. It’s a liability to be paid on time.
This is a critical conversation to have with your kids if they are paying for their cell phones. This is the start of their credit history. Paying the cell phone bill on time can actually help build their credit history and score. But being consistently late can drag their score down, placing them in an area that will be hard to obtain credit later on including getting a mortgage.
The best strategy is to set up an automatic withdrawal from your bank account or credit card each month. If not, we’re sure there’s an app to set up reminders to make your payment each month!