Does Paying Utilities Help Your Credit Score?

A credit score is a numerical summary of an individual’s creditworthiness, based on their borrowing and repayment history. A strong score influences access to financial products like loans, credit cards, and housing. Many wonder if routine utility payments affect this assessment. This article clarifies the relationship between utility payments and credit scores.

Direct Impact on Credit Scores

Regular monthly utility payments for services like electricity, gas, water, internet, and phone are generally not reported by utility companies to the three major credit bureaus: Experian, Equifax, and TransUnion. Utility providers are service companies, not traditional lenders, and do not typically report positive payment histories. Therefore, consistently paying utility bills on time usually does not directly improve your credit score. Accounts that form the foundation of a credit report typically include credit cards, mortgages, and auto loans.

Indirect Impact on Credit Scores

While on-time utility payments generally do not positively impact credit scores, missed payments can significantly harm credit. If a utility bill becomes severely delinquent (often 90 to 180 days past due), the utility company may transfer the debt to a third-party collection agency. This collection agency, not the original utility provider, typically reports the delinquent account to major credit bureaus. A collection account on a credit report can substantially drop credit scores. These negative marks can remain for up to seven years from the original delinquency date, potentially impacting future borrowing opportunities even if the debt is paid.

Services That Report Utility Payments

Several third-party services allow individuals to leverage on-time utility payments to build credit. Programs like Experian Boost enable consumers to add positive payment history for eligible utility, phone, and streaming bills to their Experian credit file. These services typically require users to link bank accounts to identify and verify recurring payments. The benefit is establishing or strengthening a credit profile, especially for those with limited credit history.

However, limitations exist: these services may only affect scores from a single credit bureau like Experian. Not all lenders incorporate these alternative scoring models, and some services may involve fees. Other services, such as LevelCredit or various rent reporting services, can also report utility and/or rent payments to credit bureaus, sometimes including historical payments.

Other Ways to Build Credit

Beyond utility payment reporting services, several established methods exist for building and improving credit scores. Consistently making all loan and credit card payments on time is paramount, as payment history is the most significant factor in credit scoring. Maintaining low credit utilization, generally keeping credit card balances below 30% of available limits, also demonstrates responsible credit management.

Having a diverse mix of credit accounts, such as installment loans and revolving credit, can positively influence a score by showcasing the ability to manage different credit types. Avoiding opening too many new credit accounts in a short period helps prevent multiple hard inquiries that can temporarily lower scores. For individuals with no credit history, secured credit cards (requiring a cash deposit as collateral) or credit-builder loans (where loan proceeds are held until repayment) can serve as effective starting points.