Do utility bills affect my credit score?
Delve into how utility bills can impact your credit score. Learn about the role of utility payment reporting and the implications for your credit health.
Utility Bills and Credit Scores: The Connection Unveiled.
Utility bills, such as those for electricity, water, gas, or cable TV, are not typically reported to the major credit bureaus (Equifax, Experian, and TransUnion), and they do not directly impact your credit score in the same way that credit card or loan payments do. However, there is a connection between utility bills and credit scores, although it's somewhat indirect:
Payment History Reporting: Utility companies generally do not report your payment history to credit bureaus. This means that making on-time utility payments won't directly boost your credit score.
Impact on Credit if Unpaid: While timely utility payments may not improve your credit, unpaid or delinquent utility bills can indirectly harm your credit score. Some utility companies may eventually send unpaid bills to collections. When this happens, the collection account can be reported to credit bureaus, negatively impacting your credit score.
Credit Reporting Agencies: Some credit scoring models, like the FICO® Score and VantageScore, may consider alternative data sources, such as rental payment history and utility payments, when calculating your score. However, this is not a standard practice, and not all lenders use these alternative data sources.
Positive Impact with Reporting Services: There are services and programs, such as Experian Boost and UltraFICO, that allow you to voluntarily include utility payments in your credit history. These services can help people with thin or no credit histories by adding positive payment data to their credit reports, potentially improving their scores.
In summary, while utility bills do not have a direct impact on your credit score, they can indirectly affect it if they go unpaid and result in a collection account being reported. Additionally, some credit scoring models and services are beginning to consider utility payments as part of your credit history, potentially providing an opportunity to boost your score. However, it's essential to continue making on-time payments for all your financial obligations, including utility bills, to avoid negative consequences on your credit and financial stability.