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 (CRAs). What’s more, the UK’s 3 major CRAs (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 3 major CRAs, either through getting a statutory report or using a free trial.
What could be recorded on my credit file?
If you use a credit meter for your gas and electricity, your payment history could be recorded on your credit file. However, this depends on the supplier, as some don’t pass this information on.
Missed payments are more likely to be reported to CRAs than those made on time, but it’s possible for both to be recorded. Missed payments can be logged on your credit file for up to 6 years.
If your utility provider takes legal action to retrieve money owed to it, this can lead to defaults or county court judgments (CCJs), which 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 seriously damage your credit score.
Some lenders 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.
Does paying bills increase your credit score?
It’s good practice to make sure your bills are paid on time. But the exact details passed on to CRAs depend on your utility provider. Paying bills on time can help you build a positive payment history that lenders can see and help them determine you’re a reliable person to lend to.
However, even if your credit score isn’t going up because you’ve paid your bills on time, remember that not paying them on time can damage your credit score.
What happens to my credit score if I forget to pay my bills?
Each time you miss a payment, it will likely be recorded on your credit file and can negatively impact your credit score. The more payments you miss, the worse it will get. Future lenders will see these missed payments, which could affect your ability to get credit in the future.
How can I build up my credit score?
There are plenty of ways you can build up your credit score. For example:
Register on the electoral roll. This helps lenders verify you are who you say you are.
Check your credit report and correct any mistakes. This could be as simple as a mistake in your address, for example.
Spread out credit applications. Each time you apply for credit, a hard check is carried out on your credit report, and your credit score can drop slightly. Too many applications in a short time can have a larger negative impact on your credit score.
How can I stay on top of my utility bills?
The best way to ensure you pay your utility bills on time is to set up a direct debit. That way, the money will be taken out of your bank account automatically, so you won’t need to remember. However, you’ll need to ensure sufficient funds are in your bank account to meet the payments.
You can also take plenty of steps to reduce energy usage around the home and help lower your bills. For example, only run washing machines and dishwashers when they’re full, draught-proof windows and doors and make sure your home is well insulated.
If you’re struggling with your utility bills, it’s crucial to speak to your suppliers as soon as possible. They will work with you to come up with a solution, which could include setting up a new, more affordable payment plan.
Impact of joint utility bills on credit scores
If you and your partner’s or housemate’s names are both on your utility bills, this could create a financial association between you.
This will be noted on your credit report. Although your own credit score won’t be directly affected by the other person’s, a financial association can mean the other person’s credit history is considered along with your own when you apply for credit. If they have poor credit, this can reduce your chances of getting approved – even if you apply alone.
It’s important to keep this in mind if you’re thinking of having joint utility accounts.
What if my name isn’t on the bill?
If your name isn’t on the bills, but you contribute towards them, the accounts won’t appear on your credit report. This means your credit score won’t be affected if payments aren’t made, but it also means you won’t get any of the positive benefits if the bills are paid on time. That’s why it can be sensible to add your name to utility bills if you’re paying on time and trying to increase your credit score.
Dos and don’ts
Do
Pay your utility bills by direct debit. This reduces the chances of missing a payment, plus many utility bill providers offer a discount when you pay this way.
Tell your provider if you’ll likely miss a payment. Often, you’ll be given the opportunity to negotiate a more affordable payment schedule.
Don’t
Fall behind on bill payments Try to stay on top of your payments, because even if there is no impact on your credit score, your provider may fine you or shut off your power supply.
Ignore warnings about overdue bills. The longer you wait to pay, the more damage it could do to your credit score. It could also result in legal action taken against you.
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 the 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
All repayments on “credit accounts” will be reported to CRAs and will likely affect your credit score. This includes mortgage, credit card, loan and mobile phone repayments. In some cases, your utility bill payments can also affect your credit score.
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 for a huge loan.
If you fall too far behind on your utility bills, they will eventually be passed on to debt collectors. At this point, the debt usually is reported to credit reference agencies.
If you take out a mobile phone contract, you’ll create a credit agreement with your provider and will usually need to make monthly payments over a set time. These payments will most likely be reported to at least one credit reference agency. If you make your payments on time, your credit score should go up. If you don’t, your credit score will drop.
If you have a prepayment meter, you pay for your energy in advance by topping up the meter. Because there’s no credit involved, it’s unlikely to be recorded on your credit report.
However, if you want to switch from a prepayment meter to a credit meter, you’ll need to undergo a credit check and your energy account will need to be debt-free.
Potentially, yes. If your repayments are recorded on your credit report, lenders use this to help them assess your reliability, whether you make repayments on time and whether they are happy to lend to you.
Read about how different factors can affect your score
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Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time. See full bio
Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio
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