Can Utility Bills Affect Your Credit? Expert Insight
The credit score...40% of Americans have no idea how it works or how credit is determined! Luckily we are here to help with this simple guide! One of the biggest factors that play a role in your credit score is unpaid or late utility bills.
We are going to give you an expert's insight on understanding unpaid utility bills' effect on your credit. So, before you let your credit score drop any lower...Let's get started!
How Do Utility Bills Affect Credit?
Traditionally, utility companies do not report payments to the three major credit bureaus. Because the utility companies don't report payments, your payment history with the utility company won't impact your credit score. With that being said, there are some factors to consider.
If you fail to pay a utility bill or have repeatedly missed payments, your utility company might turn your bills over to collections. If your unpaid utility bills get turned into collections, they will have a negative impact on your credit score. Additionally, certain companies will look at alternative credit to determine a person's credit score.
Alternative credit takes regular payment history into account. A person's alternative credit will be affected by utility bills and payment history. If you are interested in learning more about how to add utility bills to your credit report, click here.
Utility Bills in Collections
According to the NCLC, there are an estimated seventy million Americans with some form of debt in collections. Missing your payment due date by one or two days is not likely to affect your credit score. However, if you are more than thirty days late on your payment, your utility provider will most likely send your bill to a collection agency.
Once the collection agency receives your debt, they will report it to the major credit bureaus until it has been resolved. Even after a debt has been resolved, it can take time for your credit score to recover. Additionally, if a debt goes unresolved legal action can be taken to settle the debt.
Payment History and New Utilities
Although your payment history might not have a big impact on your credit score, it can affect your future utilities. Utility companies can see your payment history from previous providers, so they will be able to see if you have delinquent payments or if your bill was sent into collections.
New utility companies will use the information from your previous provider to determine if you need to pay a large deposit or if you can be accepted for service. If you are denied service from a utility company, you may have to find a person to co-sign on your behalf or write a letter of guarantee.
Managing Your Credit
As you can see, utility bills do have an indirect effect on your credit score. If you are a person with a low credit score, or if you are credit invisible, it is important to manage your utility payments so they can be used to showcase your alternative credit. It might sound complicated, but it is actually simple!