Does Not Paying Your Utility Bill Affect Your Credit?

Many people move from one residence to another and forget to pay a final utility bill or simply do not have the funds to pay a utility bill at some point. Although most people realize that not paying a loan or credit card payment can negatively impact a credit score, many do not realize that leaving that utility bill unpaid can also end up lowering your score.

Credit Scores

Your credit score, or FICO score, is comprised of three scores assigned to you by the three major credit reporting agencies: Experian, TransUnion and Equifax. Your FICO score can impact everything from your ability to secure a mortgage to whether you are offered a job or approved to rent an apartment. Your FICO score is based on how long you have used credit, what type of credit you have used and your payment history, as well as on the amounts you owe and whether you have recently acquired new credit.

Utility Companies

Whether a utility company reports your payment history to the credit bureaus will vary from one company to the next. Large utility companies are more likely to report than smaller companies. Any company that chooses to report to a credit bureau must pay a fee for using the reporting service. For this reason, not all utility companies choose to report customer payment history. The only way to know for sure whether your specific utility company reports to a credit bureau is to ask.

Collections and Judgments

Although not all utility companies regularly report to a credit bureau, an unpaid bill is likely to be reported by either a collection agency or a court. Most utility companies turn over unpaid bills to a collection agency for collection if the account remains unpaid after a certain period of time. Collection agencies almost always report to at least one credit bureau. The utility company may also choose to file a lawsuit against you in small claims court, or in a general civil court, for the unpaid bill. If a court enters a judgment against you for the unpaid bill, the judgment becomes a public record which is also reported to the credit bureaus. Therefore, even if your utility company does not regularly report to a credit bureau, the unpaid bill will, in most cases, eventually be reported by either a collection agency or a court.

How to Check

If you are concerned that an unpaid utility bill has been reported to one of the credit bureaus, you can check your credit report one time per year free of charge on the annualcreditreport.com website. This is made possible through federal law, and the annualcreditreport.com website is the only website officially sanctioned to provide this service. There are, however, a number of other companies that can provide a report for a fee.