Do Monthly Subscriptions Help Improve Your Credit Score?
Subscription services generally won’t affect your credit. At least not directly. But there are ways to get credit for these monthly bills and improve your credit scores.
Understanding monthly subscription services
There’s a good chance you have at least one or two subscriptions that you pay each month. These might include:
- Music and video streaming services
- Gym memberships
- Gaming memberships
- Cloud storage services
- Subscription boxes
Although people generally don't consider them subscriptions, you also might be paying other monthly bills, such as internet, utility, and phone bills. These accounts and payments usually don’t get reported to the credit bureaus or help your credit. But similar to subscription services, there may be ways to use them to improve your credit scores.
How monthly subscription services can help build credit
Even if you’ve been making your payments on time for years, the companies that offer these subscriptions don’t report your payments to the three major credit bureaus—Equifax, Experian, and TransUnion. As a result, your on-time payments don’t appear in your credit reports and can’t help your credit scores.
However, there are two ways to get credit for your subscriptions.
Pay the bills with a credit card
You could pay your monthly subscriptions with a credit card. Your monthly payments won’t appear in your credit reports directly, but many credit card issuers report your card payments to all three credit bureaus. As a result, the on-time credit card payments can help you build a positive credit history.
Also, if you only use the credit card to pay for subscriptions, the card might maintain a low credit utilization ratio—this can also help your credit scores.
Use a third-party service to add payments to your reports
Another option is to use a third-party service to add subscriptions and other bill payments directly to your credit reports. But there are a few drawbacks.
- These often only add the payments to one of your reports, which won’t help your credit scores based on the other two reports.
- Most services focus on utility and telecom payments, not subscription services.
- You have to link your accounts to the service, but the service might not support your bank or credit union.
- There could be an additional monthly fee for each service.
Using third-party services to add your rent payments to all three of your credit reports can be worthwhile. However, there might be better options for improving your credit scores with subscription payments.
Strategically using automatic payments
Using a credit card might not seem intuitive if you’ve dealt with high-interest credit card debt, or even seem possible if you have a low credit score and won’t qualify for many credit cards.
But you can use this credit-building strategy regardless of your credit score and without paying any interest. Here’s how:
- Don’t use a credit card that has a revolving balance. If you do, you could accrue daily interest on every new charge, including your subscriptions. Instead, use one of your cards that doesn't have a balance. Or, open a new card that doesn’t have an annual fee and doesn’t require a credit check, like the Ava Card.
- Start with small subscriptions. Keep the total subscription charges under 10% of your card’s credit limit to maintain a low utilization ratio. This might mean starting with just one or two subscriptions.
- Use automatic payments. Link your checking account to pay the bill in full and avoid interest charges. You’re already paying this amount every month anyway.
Setting up automatic payments for the credit card’s full statement balance can help you avoid late payments and interest. However, you’ll still need to monitor your bills and bank account to make sure you don’t overdraft your account when the credit card bill is due.
Other ways to build credit
Using your subscriptions to build credit can be a nifty way to improve your credit scores without taking on extra debt. There are other options as well, and sometimes, a multi-pronged approach can improve your score faster.
Credit builder loans
For example, you could open a credit builder loan, a type of secured personal loan. Your loan amount generally gets locked in a savings account, the lender reports your monthly payments to the credit bureaus, and then you receive the money when you finish repaying the loan.
Credit-building loans allow you to build your savings and credit at the same time. Plus, having an open installment loan and revolving line of credit, such as a credit card, can add to your credit mix and help your scores.
Secured credit cards
Secured credit cards are also often recommended when people are new to credit or rebuilding their credit. They work like regular credit cards, but you have to send the card issuer a security deposit. The deposit will generally determine your card’s credit limit, and you might not get it back until you close the account.
Secured credit cards can be helpful if you’re struggling to qualify for a new credit card, but they could have lots of fees and high interest rates. Newer alternatives can offer similar credit score benefits with much lower costs.
Managing existing accounts
You’ll also want to manage your existing credit accounts and bills to improve your credit scores:
- Make bill payments on time. On-time loan and credit card payments can add to your payment history, one of the most important scoring factors.
- Lower your utilization rate. Paying down or consolidating credit card debt could lower your utilization rate and might quickly increase your scores.
- Pay off collections accounts. Settling or paying off collection accounts can improve some of your credit scores.
It’s important to stay on top of bills that aren’t reported to the credit bureaus as well. Even if your on-time payments aren’t building credit, the company might send your account to collections when you fall behind. The collection account could appear in your credit report and hurt your scores.
You can’t necessarily go from poor credit to excellent credit overnight. However, strategically using and managing credit accounts can help you improve your creditworthiness and personal finances over time.
Getting started can be difficult, especially for people who have bad credit and struggle to qualify for a new loan or credit card. That’s why we created the Ava card.
The Ava card doesn’t require a hard credit check—applying won’t affect your credit score—and it doesn’t have any fees or interest charges. Automatic payments are built in, and its high limit allows you to use it for several subscriptions while maintaining a low utilization ratio.