Because utility companies usually don’t report to the credit bureaus, your utility bills will only affect your credit score if you stop payment and your utility provider turns you over to collections.
However, new tools can ensure your utility bills show up on your credit report, which may help improve your score.
Do utility payments affect your credit score?
Traditionally, utility bill payments only affect your credit score if you stop paying your bills. Most utility companies don’t report to the credit bureaus, so you don’t get credit for making your payments on time.
This is a blow to consumers who might otherwise benefit from the positive payment history. However, some relatively new credit-building strategies make it possible for your on-time utility payments to appear on your credit report.
Why aren’t utility payments reported to the credit bureaus?
The majority of states don’t require utility companies to report consumers’ payments to the credit bureaus. This is because creditors who report to the bureaus must comply with the Fair Credit Reporting Act (FCRA), and most utility companies would rather skip reporting than jump through all the legal hoops required by the FCRA.
For example, the FCRA gives consumers the right to dispute inaccurate items on their credit reports, and creditors must investigate and remove any accounts reported in error. Conducting these investigations and correcting inaccurate information can be a time-consuming and costly process for utility providers.
Thus, most utility companies find it easier to forego reporting. As a result, consumers don’t get credit for making their utility payments on time, but they can certainly see their credit score drop if a utility company turns them over to a collection agency.
Can a utility bill hurt your credit?
Unfortunately, a utility bill can hurt your credit. This can happen when you make your payments late or you miss so many payments that your account becomes delinquent.
In most cases, missing one or maybe even several utility payments isn’t going to cause a provider to turn you over to collections. However, missing month after month of payments or falling seriously behind on your bill can prompt a provider to charge off your account.
If this happens, your credit score can take a serious hit. This is because your payment history makes up 35 percent of your credit score, making it the most important of the five factors that affect your score.
Worse, collection accounts stay on your credit report for seven years, meaning a utility account can hurt your credit score for a long time. This is why you should do everything possible to avoid paying utility bills late.
2 ways to make your payments count for building credit
If you want to get credit for paying your utility bills on time, there are a couple of ways to do it. Here are two strategies to consider.
1. Experian Boost
Experian Boost is a relatively new service offered by Experian, one of the three major credit bureaus. As the name indicates, the service is designed to “boost” your Experian score by reporting phone, internet, and utility bills to your credit report.
Experian Boost is totally free, but you have to link the service to your bank account to use it, as this is how Boost knows you paid your utility bills on time. On the downside, Experian Boost only reports utility bill payments to Experian — Equifax and TransUnion aren’t included.
According to Experian, the average Boost user saw their credit score go up 13 points, so it’s probably worth checking out if your credit score could use some work.
2. Use a rent payment reporting service
Like utility bills, most rent payments don’t show up on your credit report. However, there are a number of online services that will report your rent payments to the credit bureaus in exchange for a fee.
- Rock the Score – Rock the Score is $25 to sign up and $8.95 per month, but you can cancel at any time with no penalty. It reports to TransUnion and Equifax.
- RentReporters – At $94.95 to sign up and $9.95 per month, Rent Reporters is more expensive than many of its competitors. It reports to Equifax and TransUnion.
- Rental Kharma – Once you sign up, Rental Kharma can post up to 24 months of your rent payment history to your credit report. It costs $50 to enroll and $8.95 per month billed quarterly.
- RentTrack – RentTrack reports to all three credit bureaus and members pay a processing fee only. However, your landlord or property management company must already use RentTrack for you to use the service.
- PayYourRent – Pay Your Rent reports to all three credit bureaus, but it’s only an option if your landlord or property management company uses PayYourRent. The tenant plan is $9.95 per month and there is no signup fee.
The following are some of the most frequently asked questions and answers regarding your utility bills and your credit score.
Do mortgage payments affect your credit score?
Mortgage payments can affect your credit score in both positive and negative ways depending on how responsible you are about paying on time.
Paying your mortgage on time each month can be a big help for your credit score. However, if you stop paying your mortgage, your lender could foreclose on your home — one of the most damaging negative items to have on your credit report.
The higher your credit score, the bigger the impact of even a single 30- or 90-day late mortgage payment. A FICO simulation of people with different credit scores revealed that those with a 793 score saw up to a 133-point drop with one 90-day late mortgage payment on their credit report.
Borrowers with a score of 607 also saw their score go down with a 90-day late house payment on their report, but the drop was more modest at just 27 to 47 points.
Do cell phone bills affect your credit score?
Generally, cell phone bills don’t affect your credit score unless you default on your phone contract. If your mobile phone service provider turns your account over to a collection agency, it could hurt your score.
Do insurance payments affect your credit score?
Insurance companies typically do not report payments to the credit bureaus. However, missing your payments or constantly sending in payments late can cause your insurer to raise your rate or decide not to renew your coverage.
Do car payments affect your credit score?
It’s common for car payments to appear on your credit report. Taking out a car loan can also affect your credit score in other ways.
For example, applying for an auto loan results in a hard inquiry on your credit report. Having too many hard inquiries on your report can lower your score because lenders might see it as a sign you can’t pay your bills.
On the other hand, taking out a car loan adds to your credit history, which can help your score increase.
Do medical bills affect your credit score?
Medical debt can affect your credit score, but federal law requires the credit bureaus to treat medical debt differently than other types of debt.
For example, the credit bureaus must wait 180 days before posting a medical debt to an individual’s credit report. This waiting period is designed to give consumers an opportunity to become aware of the debt and either dispute it or make arrangements with the creditor to pay it.
Federal law also requires the credit bureaus to remove medical debt from a person’s credit report once the debt is paid. This is different from other types of debts, which stay on your credit report even after they’re paid.
Do cable and internet bills affect your credit score?
Cable and internet bills are like utility bills and they usually aren’t reported to your credit report. However, Experian Boost will report internet and cable bills, including streaming services like Netflix.
Do student loans affect your credit score?
Student loans can affect your credit score, and they typically show up on your credit report. This is why it’s important to always pay your loans on time, as your payment history is the most influential factor when it comes to your credit score.
Do rent-to-own or rent payments affect your credit score?
Rent-to-own payments and rent payments generally won’t affect your credit score because landlords and those who offer rent-to-own financing don’t report to the credit bureaus.
In most rent-to-own arrangements, the tenant rents the home from the owner and makes a house payment every month. After a period of time or a certain number of payments, the tenant owns the home.
Rent-to-own contracts can be a good option for people who want to buy a house but don’t have a good enough credit score to qualify for financing. However, you typically can’t use your rent-to-own payments to build your credit score.
This is where a rent payment reporting service can be useful. While there is usually a fee involved, it might be worth paying a little extra each month to make sure you get credit for all your on-time payments.
Do automatic payments affect credit scores?
On their own, automatic payments don’t affect your credit score one way or the other. However, they may make you less likely to pay a bill late, which can help your credit score.
Is it better to pay bills with credit or debit?
There are pros and cons to paying your bills with a debit card or credit card. For example, paying utility bills with a credit card means you might not necessarily get credit for paying the utility bill on time, but you will get credit for paying your credit card bill on time.
On the other hand, it’s important to be careful about using your credit card to pay bills. If you rack up a large balance and then start paying your credit card late, this will hurt your credit score.
While utility bills don’t usually appear on your credit report, services like Experian Boost can help you get credit for paying those bills on time. When it comes to your credit score, every little bit helps.