Do utility bills affect your credit score?

If you’re wondering whether utility bills affect your credit score, the answer is: it depends.

Energy suppliers each follow different standards when it comes to reporting information to credit reference agencies. What’s more, the UK’s three major credit reference agencies (Experian, Equifax and TransUnion) each process this information differently to create your credit score.

The best way to find out what’s affecting your credit score is to request a copy of your credit report. You can get a free credit report from any of the UK’s three major credit reference agencies, either through getting a statutory report, or using a free trial.

What could be recorded on my credit file?

It’s rare for timely utility bill payments to be passed on to credit reference agencies, as utility bill accounts aren’t regarded as credit accounts.

However, missed payments are more likely to be reported to credit reference agencies. In this case, it would be logged on your credit file for up to seven years.

If your utility provider takes legal action to retrieve money owed to it, this can lead to defaults or county court judgements (CCJs), which definitely will be logged on your credit file. If you fall into serious debt that results in an individual voluntary arrangement (IVA) or bankruptcy, this will also be logged.

How could it affect my chances of getting a loan or credit card?

A missed utility bill payment may harm your credit score. This figure is considered by lenders when assessing how risky it would be to lend money to you. The higher your credit score, the easier it is to be approved for the best loans and credit cards.

Remember, each credit reference agency calculates your score using different algorithms. However, serious “red flags” logged on your credit report, such as defaults and CCJs, are more likely to do serious damage to your credit score.

Some lenders will flat-out refuse to work with applicants who have certain red flags on their credit files. Others will still accept an application, provided the applicant’s overall credit score is still healthy.

If your credit score is poor, it’s often recommended to rebuild it before applying for a large loan or credit card.

Dos and don’ts

The bottom line

The impact of your utility bills on your credit score depends on your energy provider and what credit reference agency is used by lenders you apply to in the future.

Nevertheless, in every imaginable scenario, it is extremely useful to pay your utility bills on time and avoid falling into arrears.

Frequently asked questions

• What bills do affect my credit score?

  All repayments on “credit accounts” will be reported to credit reference agencies and are likely to affect your credit score. This includes mortgage, credit card and loan repayments.

  With “non-credit accounts” such as telecoms bills, utility bills or home rental payments, your credit score is only likely to be affected if you fall into serious arrears.

• Do energy providers run credit checks?

  Most energy tariffs allow us to buy our energy in advance. When applying for these types of tariffs, energy providers will run a credit check to assess the likelihood of you paying your bills on time. These checks will produce a small dip in your credit score. It’s typically easier to be approved for an energy tariff with poor credit than it would be for a huge loan.

• Do utility bills go to collections?

  If you fall too far behind on your utility bills, they will eventually be passed on to debt collectors. It is usually at this point that the debt is reported to credit reference agencies.