Do Utility Bills Help Your Credit Score?

Credit scores play a significant role in an individual’s financial life, influencing access to loans, credit cards, housing, and even insurance rates. These numbers provide lenders a snapshot of a consumer’s creditworthiness, based on their borrowing and repayment history. Many wonder if consistent, on-time payments for everyday expenses, such as utility bills, contribute to building this financial profile. Understanding how these routine payments interact with credit reporting can help individuals better manage their financial standing.

The Standard Approach to Utility Bill Reporting

Regular, on-time utility payments for services like electricity, gas, water, internet, and phone are not typically reported to the three major credit bureaus: Experian, Equifax, and TransUnion. Utility companies are not traditional lenders, so they are not required to report positive payment data to credit reporting agencies. This means diligently paying your monthly utility bills usually does not directly help build a positive credit history in the same way that credit card or loan payments do.

However, the situation changes if utility payments become delinquent. If an account falls significantly behind (typically 30 to 90 days past due), the utility company may send the unpaid debt to a collection agency. Once a debt is placed with a collection agency, that negative information can be reported to the credit bureaus. Such collection accounts can severely damage a credit score and remain on a credit report for up to seven years from the original delinquency date, even if the debt is eventually paid.

How Utility Payments Can Be Reported

While direct reporting of positive utility payment history is not standard, consumers can leverage on-time utility payments to build credit through third-party services. These services act as intermediaries, collecting and reporting payment data that would otherwise not appear on a credit report.

One prominent option is Experian Boost, a free service that enables users to connect their bank accounts. Experian Boost identifies and adds qualifying on-time payments for utilities, phone bills, and streaming services directly to the user’s Experian credit report. This service focuses on positive payment history, meaning any missed payments for linked accounts are ignored and will not negatively impact the score through the service.

Another service, UltraFICO, developed by FICO, Experian, and Finicity, allows consumers to share their banking activity from checking, savings, and money market accounts. This opt-in program considers factors like the length of time accounts have been open, transaction frequency, and consistent positive balances. UltraFICO provides lenders with a more comprehensive view of an individual’s financial behavior, particularly benefiting those with limited or “thin” credit files.

Other services, such as LevelCredit and eCredable Lift, also facilitate the reporting of utility payments. LevelCredit reports utility payments specifically to TransUnion, in addition to rent payments which it can report to Equifax and TransUnion. These services often charge a monthly fee, with LevelCredit costing approximately $6.95 per month, and may offer the option to report up to 24 months of past payment history for an additional one-time fee, such as $49.95. Similarly, eCredable Lift reports utility and cell phone bills to TransUnion and can also include up to two years of past payments.

Impact on Your Credit Score

The reporting of utility payments, especially through alternative data platforms, can influence credit scores, though the extent of this impact varies across different scoring models. Traditional FICO Score models, such as FICO Score 8, rely on data from traditional credit accounts and do not incorporate alternative data like utility payments unless they appear as a collection. However, newer FICO models, including FICO Score 9, FICO Score 10, and FICO Score XD, consider non-traditional data sources, including utility and telecom payments.

For instance, users of Experian Boost, which reports to Experian, often see an average increase of 13 points in their FICO Score 8. This can be particularly beneficial for individuals with limited credit histories who might not otherwise have enough data to generate a traditional score. VantageScore models, including VantageScore 3.0 and VantageScore 4.0, are more receptive to alternative data and can be more sensitive to positive payment history from non-traditional sources.

The impact of reporting utility payments may not be universal across all lenders. Not all lenders use the same credit scoring models or incorporate alternative data in their lending decisions. Therefore, a positive change reflected in one score may not be recognized by every potential creditor.

Leveraging Utility Payments for Credit Building

To effectively leverage utility payments for credit building, a strategic approach is beneficial. Begin by obtaining your credit reports and scores from all three major bureaus to understand your current credit profile. This helps identify areas for improvement and determines if alternative data reporting aligns with your credit-building goals.

Next, research the various third-party services that report utility payments, considering factors such as their fees, which credit bureaus they report to, and customer reviews. Evaluate whether the potential increase in your credit score justifies the associated costs, especially for subscription-based services. Remember that some services, like Experian Boost, are free and can offer a significant benefit for your Experian score.

Maintaining consistent, on-time payments for all your bills, including utilities, is a fundamental practice regardless of whether they are reported to credit bureaus. This discipline prevents negative marks from collections that can severely damage your credit. While utility payment reporting can be a helpful tool, it should be part of a broader credit-building strategy that includes responsible use of traditional credit products, such as secured credit cards or small personal loans, to establish a diverse and strong credit history.