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Does Paying Utility Bills Build Credit?

Written by Allison Martin

Allison Martin is a personal finance enthusiast and a passionate entrepreneur. With over a decade of experience, Allison has made a name for herself as a syndicated financial writer. Her articles are published in leading publications, like, Bankrate, The Wall Street Journal, MSN Money, and Investopedia. When she’s not busy creating content, Allison travels nationwide, sharing her knowledge and expertise in financial literacy and entrepreneurship through interactive workshops and programs. She also works as a Certified Financial Education Instructor (CFEI) dedicated to helping people from all walks of life achieve financial freedom and success.

Updated May 6, 2024​

5 min. read​

does paying utility bills build credit

When you pay your utility bills on time each month, you might wonder if it helps improve your credit score. Unfortunately, utility companies typically do not report to credit bureaus, so the standard utility bill payments often don’t appear on your credit report or factor into your credit score.

Still, maintaining a positive payment history with your utilities could be beneficial if you utilize a service like Experian Boost, which can include your eligible utility payment history in your credit file. By opting into this service, timely utility payments may positively influence your credit score.

Keep reading to learn more about ways utility bills can impact your credit health.

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Understanding Utility Bills and Credit

Although utility bills generally don’t automatically impact your credit health, they may do so under certain circumstances. Here’s why.

What Are Utility Bills?

Utility bills are monthly invoices from utility companies for services provided to your home or business. These services can include electricity, water, gas, phone and internet. Normally, you have an account set up with each utility company, and you’re billed on a regular basis based on your usage or a flat rate.

These bills are essential for maintaining the day-to-day operations of your household or business, as they ensure continued access to the fundamental amenities needed for comfort, communication and functionality. The cost of utilities can be influenced by market rates, seasonal demand and infrastructure maintenance.

In some cases, utility providers offer budget billing plans to spread costs evenly throughout the year. Doing so helps households manage their finances by avoiding seasonal spikes in utility expenses. Regularly reviewing your utility consumption can also lead to discovering more energy-efficient practices, potentially leading to lower bills.

Do Utility Bills Appear on Your Credit Report?

Typically, utility bills do not appear on your credit report. Most utility companies do not report regular, on-time payments to the credit bureaus. However, if your account becomes significantly past due, the utility company may send the overdue balance to collections, which can negatively impact your credit score.

Some third-party services offer to report your utility payments to credit bureaus to help build your credit, but this is not a standard practice for utility companies. More on this shortly.

Does Paying Utility Bills Build Credit?

As aforementioned, utility companies typically do not report your payment history to the credit bureaus. So, in most cases, paying these bills on time may not impact your credit score unless you opt-in for third-party reporting or if your account becomes delinquent for an extended period.

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How Utility Bills Affect Your Credit Score

Your regular utility bill payments might seem separate from your credit report, but their impact on your financial health can be more intertwined than you may realize.

Consequences of Unpaid Utility Bills

Should utility bills go unpaid, the consequences extend beyond late payment penalties and service interruptions. If your account becomes seriously delinquent, the utility company may hand over the debt to a collection agency.

Once in the hands of debt collectors, the overdue payment can be reported to three major credit bureaus – Experian, TransUnion and Equifax – potentially leading to negative marks on your credit report. Consequently, this can result in a significant drop in your credit score.

A lower credit score can have long-term effects, making it more challenging to qualify for loans, credit cards or mortgages with favorable interest rates. It may even influence potential employment opportunities, as some employers check credit history as part of the hiring process.

Plus, future attempts to open accounts with other utility companies could require a higher deposit, or you might be denied service altogether until past debts are settled. In extreme cases, unpaid utility bills can even lead to legal action being taken against you, which could include wage garnishment or a lien on your property.

The impact of unpaid utility bills can also extend to your daily living conditions. Without essential services like electricity and water, your home life can become difficult and stressful. This can negatively affect your health and well-being, as well as that of your family members, especially during extreme weather conditions when these services are most needed.

To avoid such dire consequences, it’s vital to communicate with your utility provider if you’re facing financial hardship. Many companies offer payment plans or can direct you to assistance programs to help you manage your bills and avoid the severe repercussions of non-payment.

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The Direct Impact of Paying Utility Bills

Unlike mortgage or credit card payments, utility bills are not inherently designed to boost your credit score. But as previously mentioned, there are tools like Experian Boost that offer the opportunity to incorporate utility payments into your Experian credit report. When reported, regular utility payments can contribute positively to your payment history, which accounts for 35 percent of your credit score.

Why Utility Bills Are Not Typically Reported to Credit Bureaus

When you pay your utility bills, you might assume it would reflect on your credit report. However, this is not standard practice.

Factors Affecting Credit Bureaus’ Reporting Decisions

Here are some key reasons why utility providers choose not to report payment history to credit reporting agencies.

For starters, reporting to credit bureaus involves cost. Service providers often choose not to report because there is a fee associated with reporting to the major credit bureaus.

Utility companies may not see a direct benefit to their bottom line from reporting timely payments, as their primary concern is the collection of payments, not the creditworthiness of their customers. This lack of financial benefit can make the cost of reporting seem unjustifiable, especially for smaller utility companies with tighter budgets.

It also requires significant resources in terms of manpower and technology to report and manage data accurately. This factor alone may deter some utility companies from reporting to credit bureaus. Plus, the process of continuously updating payment information and resolving disputes can be labor-intensive and complex.

Utility companies may prefer to allocate their resources to service provision and operational improvements rather than to the administrative tasks associated with credit reporting.

The Role of Third-party Services

Luckily, there are third-party services you can use to have your utility bills reported to the credit bureaus. You’re already familiar with Experian Boost by now. Or you can use another service.

Regardless of which route you take, keep in mind that only a subset of your utility bills might be reported through these third-party services. Furthermore, not all credit bureaus will receive this data, so that the impact will vary.

These third-party services act as intermediaries, verifying your payment history and then forwarding this information to the credit bureaus. While this can be beneficial for building credit, especially for those with a thin credit file, it’s important to understand the limitations.

For example, some services may only report positive payment history, and others might charge a fee for their reporting services. It’s also worth noting that not every lender uses all three bureaus for credit checks, so even if your payments are reported, they may not be seen by every potential creditor.

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How to Report Your Utility Bills to Build Credit

Reporting utility bill payments to credit bureaus is key to leveraging utility bill payments for credit-building purposes. You can sign up for Experian Boost free of charge to make it happen.

Sign Up for Experian Boost

As previously mentioned, this service enables you to add your eligible utility bill payments to your Experian credit report. Experian identifies and verifies your utility payment history by connecting your bank account. Once the service confirms your payment records, it instantly reports them to your Experian credit report. Positive payment history, like regular, on-time utility bill payments, may positively impact your credit score, as it provides evidence of your financial reliability to lenders and creditors.

You can enroll by signing up for a free account. It also includes access to your Experian credit report and FICO Score based on Experian data, along with Experian credit monitoring, real-time credit alerts, and so much more. Sign up today to test drive this free, valuable service.

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