Do Utilities Count Towards Credit Score?

A credit score serves as a numerical representation of an individual’s creditworthiness, providing a snapshot of their financial reliability. Lenders and creditors utilize these scores to evaluate the risk associated with extending credit or services. A higher score indicates a lower risk, potentially leading to more favorable terms for loans and other financial products.

Direct Impact on Credit Score

On-time utility payments do not directly contribute to a credit score. Utility providers, such as those for electricity, gas, water, internet, and phone services, are not traditional financial lenders.

As a result, they do not report positive payment histories to the three major credit bureaus: Experian, Equifax, and TransUnion. This means that consistently paying your monthly bills for these services on time will not, by itself, improve your credit score.

The absence of positive reporting is largely due to the nature of their business operations. Utility companies are primarily service providers, not credit grantors.

Indirect Impact on Credit Score

While timely utility payments do not build a positive credit history, late or unpaid utility bills can significantly damage a credit score. If a utility bill remains unpaid for an extended period, the utility company may escalate the debt by sending it to a collections agency. This action transforms a simple overdue bill into a derogatory mark on a credit report.

Once a debt is placed with a collections agency, it is reported to the credit bureaus. A collection account appearing on a credit report can lower a credit score. These negative marks remain on a credit report for a period of seven years from the date of the first missed payment that led to the collection process.

Leveraging Utility Payments for Credit Building

Individuals seeking to have their utility payment history positively influence their credit score can explore several strategies. These methods often involve third-party services or strategic payment approaches.

One effective strategy involves utilizing third-party reporting services designed to include utility payments in credit reports. Services such as Experian Boost allow consumers to opt-in and link their bank accounts to identify eligible on-time utility, phone, and streaming service payments. This information is then added to their Experian credit file, which can increase their FICO Score. Similarly, services like eCredable Lift report utility and other recurring payments to TransUnion.

Another method to leverage utility payments for credit building is to pay these bills using a credit card. When a utility bill is paid with a credit card, the payment is processed by the credit card issuer, which then reports the payment activity to the credit bureaus. As long as the credit card balance is paid off on time and in full each month, this practice generates a positive payment history on the credit card account. This indirect approach allows individuals to benefit from their consistent utility payments by building a stronger credit profile through responsible credit card use.