How Does Not Paying Utilities Affect Credit?

Many major utility companies regularly report a consumer's payment history to at least one credit reporting agency. Not paying your utilities can affect your credit rating if the utility company chooses to report the delinquency. Contact specific utility companies to learn if they report or plan to report your utility payment status.

Credit Rating

If your utility company reports delinquent payments, it will file the negative entry with one or all three reporting agencies. TransUnion, Equifax and Experian have different calculation models for determining a consumer's credit rating. Each calculation model factors payment history as the primary consideration in the overall rating. A negative entry from not paying your utilities factors into the payment history calculation, which accounts for 35 percent of your total score.

Collection

Even if your utility company does not report payment histories to a credit reporting agency, it may turn delinquent accounts over to a debt collection agency or sell them to a debt buyer. Collection agencies and debt buyers must comply with federal guidelines found in the Fair Debt Collection Practices Act --- FDCPA. Collection attempts include contact through phone calls and letters, filing a lawsuit for a judgment against you for the balance due and reporting the delinquent or defaulted accounts to the three main credit reporting agencies.

Credit Reporting

Credit reporting agencies compile and itemize account information in a consumer's report based on information received from original creditors --- the utility company ---and by third-party collection companies. By not paying utilities, you could have more than one negative listing on your credit report --- one from the utility company and one, or more, from the third-party debt collector. Credit rating account listings may appear different for each item, even though the original debt is the same. Accumulated fees, such as interest and legal fees, may be added each time the debt is transferred or sold. Account designations may change based on whether the account is a collection or a charge-off.

Time Limit

In accordance with FDCPA guidelines, certain negative account listing information must be removed from your credit file after seven years. The seven-year time clock begins on the date of the original delinquency. Your credit rating is negatively affected for the length of the seven-year window, but the listing may have a longer impact if the utility company or third-party debt collector wins a judgment against you. Judgments are part of the public record section of your credit file and remain active for as long as the judgment is valid. In some states, judgments are valid for 20 years.