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They come around every month, and it never gets more fun to pay them: utility bills. We pay utility companies to access water, electricity, and more. Staying on top of payments ensures access is maintained, but can doing so also help improve your credit score? What if you don’t have enough money in your checking account, and you miss a payment — can it hurt your score? No matter if you’re consistent every month or you’ve fallen behind due to general or pandemic-related hardship, it’s important to understand the relationship between credit scores and utility bills.
How Do Utility Bills Affect My Credit Score?
The following information is either going to be good news or bad news, depending on your circumstances: Utility bills typically don’t affect your credit score. For those of us with limited credit history, this may come as a disappointment if you’ve been consistent about making on-time payments. If you’ve missed one or multiple utility payments in the past, you may be breathing a sigh of relief.
The reason behind this is utility companies don’t usually report to the three major credit bureaus (Equifax®, Experian™, and TransUnion®). But, this doesn’t mean your payment history is invisible to every lender. Some lenders use an alternative credit-scoring method and factor in utility and rent payments.
The thought process behind this is many people do not have enough borrowing history, and this alternative method will help them generate a score. If you’re interested in having your utility and rent payments factor into your credit score, you can sign up for services like Experian Boost™.
NOTE: Even if you opt into this free service, a lender could pull your credit from another bureau. What they see will not take this portion of your credit history into account.
Another caveat to the rule is if you fall significantly behind on utility bills. Missing payments for several months or more could result in utility companies turning over your debt to a collection agency. An account in collections can stay in your credit file for seven years. You can learn more about your credit report here.
Many Americans found themselves behind on utility payments due to pandemic-related hardship. In July, there were 450,000 Cincinnati residents behind on their bills based on figures released by the major utility companies.1 One year after COVID-19 reached the U.S., 1 in 4 Americans are still struggling financially.2
Many states, including Ohio, passed emergency laws banning utility shut offs during the pandemic. Ohio’s current moratorium is voluntary and at the discretion of the individual utility provider. If you are behind on utility payments, reach out to your utilities provider to see what your options are.
In February, Ohio governor Mike DeWine announced the $100 million from the Federal Consolidated Appropriations Act will go toward Ohioans behind on their utility or rent payments. Visit the Ohio Home Grant relief page for more information and to see if you are eligible for assistance.
How Can I Ensure I Never Miss a Utility Payment?
Utilize Online Tools
You have numerous usernames and passwords to remember, and it feels like every month you hit ‘forgot password’ when logging in. Paying bills can be a headache, but it doesn’t have to be! Some financial institutions offer Bill Pay tools to consolidate all of your bills into one online account.
This simplifies the process and ensures every payment is accounted for. Because the tool links to the bank accounts you have with the financial institution – such as a checking account – you won’t even need to get up and look for your wallet. Just select where you want to pay from and schedule it!
Embrace Automatic Payments
If you have dependable monthly access to funds, consider setting up automatic payments. Whether you set this up through your financial institution’s Bill Pay tool or you opt into automatic payments on each individual utility company’s website, this allows you to set it and forget it if you so choose.
Tip!: To set up automatic payments in General Electric Credit Union’s (GECU) Bill Pay tool, GECU members should schedule to pay bills of a set amount at regular intervals. E.g. If you pay rent on the first of the month, you can schedule a payment for the first of the month to a specified payee. View the Bill Pay demo to learn more.
Avoid setting up automatic payments if your checking account typically carries a low balance. If a bill’s due date comes around and you don’t have enough funds in your account, you may overdraft. It’s important to find a financial institution offering overdraft solutions, such as an overdraft line of credit.3 This way, your transactions are covered.
While late utility bills may not always affect your credit, it’s beneficial to avoid accumulating them if you are able. Build a budget that works for you, use your financial institution’s Bill Pay tool, or set up automatic payments to stay on top of your finances. GECU’s Bill Pay tool is free to use for members who are enrolled in Online Banking and have a GECU HSA or checking account.* If you’re on the path to rebuilding you credit score, visit our CU Events page to watch the on-demand webinar How to Rebuild Your Credit.
1 Tucker, Randy. “More than 45,000 Local Residents Risk Losing Power or Water after Ohio Moratorium on Shutoffs Lifted.” The Enquirer, Cincinnati Enquirer, 22 July 2020, www.cincinnati.com/story/news/2020/07/19/45-k-local-residents-facing-utility-shutoffs-past-due-bills/5426279002/ .
2 Ivanova, Irina. “4 In 10 Americans Struggling Financially, One Year After Coronavirus Struck the U.S.” CBS News, CBS Interactive, 5 Mar. 2021, www.cbsnews.com/news/financial-struggles-covid-pandemic-one-year/.
3 Overdraft Protection Transfer is only available to: Simply Free, Choice, and Amplified High-Yield Checking accountholders with a GECU savings or money market account. Please refer to Truth in Savings for Reg D limitations. Should you reach your maximum transactions with your primary overdraft savings account, the switch to your secondary overdraft account will occur next business day.
* Fees may apply for rushed or expedited payments.