Do Utility Payments Affect Credit Score?

If you’re like almost every American, you have several utility accounts that you make payments on to keep your water running, electricity flowing, phone lines active, and cable TV working. So, do all the utility payments that you make on a monthly basis affect your credit score? We will discuss the answer to this question in much detail below.

Do Utility Payments Affect Your Credit Score?

No, utility payments do not affect your credit score. So, whether you make all of your payments on time or miss them, doing so will not affect your credit score. That said, although the status of your utility accounts is not reported to the credit reporting bureaus, if you miss enough payments on your utility account, your utility provider may sell the unpaid debt to a collection agency. The collection agency can then add a collection account to your credit report, causing significant damage to your credit score. So, although making or missing payments on your utility account will not affect your credit score, missing too many payments can cause a series of events that could hurt your credit score.

Utility providers choose not to report your account status to the credit reporting because there are a number of laws that impose strict requirements, such as providing monthly updates on your accounts to the credit reporting bureaus, and this all costs money. So, utility providers avoid it all together.

Collection Accounts Resulting From Unpaid Utility Bills

As previously mentioned, although utility providers don’t report to the credit reporting bureaus, if you miss enough payments and rack up a ton of debt with your utility provider, your utility provider may attempt to collect the unpaid debt by selling your debt to a collection agency.

Once a collection agency purchases your unpaid utility debt, they will proceed to add a collection account to your credit report. A collection account can cause significant damage to your credit score. A single collection account can cause a 100+ point drop in your credit score, especially if you have a high starting credit score.

In addition to causing significant damage to your credit score, a collection agency will attempt to collect the outstanding debt from you. This usually involves them sending a ton of mail to you to collect the debt, as well as calling you once or several times per day.

That said, a collection account remains on your credit report for seven years from the date that you first became delinquent on making your utility payments. For example, if you first missed a payment on your utility account on January 1st, 2020, the collection account will remain on your credit report until January 1st, 2027.

After the seven year period is up, the collection account will automatically be removed from your credit report, and the negative impact it had on your credit score will be removed.

Once a collection account is added to your credit report, paying the collection account or leaving the collection account unpaid will have the same impact on your credit score. So, if you think that paying a collection account will improve your credit score, now you know that it will not. However, a paid collection account looks better in the eyes of lenders and creditors than an unpaid collection account.

Utility Payment May Impact Your Future Ability to Open Utility Accounts

Although utility payments don’t direct affect your credit score, your payments history will affect your ability to open electricity, water, or gas accounts. This is so because some utility providers track your past payment history.

If you have a spotty payment history for your utility accounts, some utility providers will not allow you to sign up for a utility account without first making a deposit or entering into an agreement where a third party makes your utility payments in the even that you fail to make the payments.

On the other hand, if you have always made your utility payments on time, you will have an easier time signing up for utility accounts. Some utility providers will even be willing to waive fees and deposits on your account if you have an excellent history of making your utility payments on time.

Bottom Line

Although your utility payments are not reported to the credit reporting bureaus and do not affect your credit score, you should always strive to make all of your utility payments on time. This will help you avoid having your utility debt sold to a collection agency that can cause damage to your credit score. So, make your payments on time and live without worrying about any negative impacts on your credit score.

Credit Score Planet Frequently Asked Questions

1. Do utilities increase your credit score

No, utility companies do not usually report your account status to the credit reporting bureaus and so making payments on your utility account will not increase your credit score.

2. What bills improve your credit score?

Bills, such as credit card bills, home mortgage payments, car payments for lease and finance, and personal loan bills will improve your credit if you make your bill payments on time.

3. Do utility bills affect your credit score?

No, utility bills do not directly affect your credit score. However, if you miss too many payments on your utility account, your unpaid debt can be sent to a collection agency. A collection agency can add a collection account to your credit report, which could cause significant damage to your credit score.

4. Do cable bills affect your credit score?

No, cable bills do not affect your credit score because your account status is not reported to the credit reporting bureaus.

5. Do internet bills affect your credit score

No, internet bills do not affect your credit score because your account status is not reported to the credit reporting bureaus.

6. Do cellphone bills affect your credit score?

No, cellphone bills do not affect your credit score because your account status is not reported to the credit reporting bureaus.

7. Do car payments affect your credit score?

Yes, car payments, whether you’re financing your car or leasing it, do affect your credit score. This is so because all car payments or lack thereof are reported to the credit reporting bureaus. If you make all of your payments on time, you will build strong credit. However, if you miss even a single payment on your car, you could cause significant damage to your credit score.

8. Do insurance payments affect your credit score?

No, insurance bill payments are not reported to the credit reporting bureaus. However, if you miss enough insurance premium bills, your unpaid debt could be sold to a collection agency, and the collection agency can come after you for the unpaid bills.