Do Utilities Affect Your Credit Score? Here’s How Rising Utility Costs Could Harm Your Credit

July 1, 2022
5 mins

If it feels like you’re paying more to keep the lights on lately, you’re not mistaken. According to the US Consumer Price Index (CPI), energy costs are up nearly 35% from this time last year. Electricity and natural gas prices have increased at rates not seen since the last recession – 12% and 30%, respectively. 

Rising utilities costs, coupled with record inflation, means less money in consumer pockets. This can make it harder to meet your monthly expenses. In a recent US Census survey, one in five households reported they were unable to pay their utility bill in full - or at all - at least once in the last 12 months. 

Good credit can help during periods of economic inflation. But it’s easy to fall behind when money is tight and prices are high. That’s why it’s important to understand how utilities affect your credit score, and how to use them to your advantage.

Do utilities affect your credit score?

Utilities companies rarely report to the national credit bureaus. This means paying your bill on time doesn’t usually affect your credit score.

If your account goes delinquent, however, your utilities provider may sell your debt to a third-party collector. These agencies generally report to the credit bureaus, which can cause your score to drop substantially. 

There’s no grace period for collections accounts. A collection agency can report to the credit bureaus as soon as they purchase your outstanding debt. This information can stay on your credit report for over seven years – unless the collection agency agrees to remove the paid-off account.  

Explore: 6 Ways to Inflation-Proof Your Credit Score

How much do utilities affect your credit score if they’re delinquent?

There’s no way to know exactly how much your score will drop if your utilities go delinquent. In general, the better your credit, the more a collections account can hurt your credit score. If you have a lower score and other negative credit history, your score may drop fewer points – but it can still be substantial.

Get help before unpaid utilities affect your credit

If you pay your bill late one month, or even miss a payment altogether, it’s unlikely your account will go into collections (though it depends on your utilities contract). Still, it’s harder to repair your credit than to damage it – so do your best to get current before your credit takes a hit.

If you’re struggling to pay your utilities bills, you may be eligible for assistance or relief. Contact your state energy assistance director or local Low-Income Home Energy Assistance Program (LIHEAP) office for more information. You can also inquire about payment plans and forgiveness programs directly with your utilities provider.  

Rising utilities can affect your credit secondhand

According to the CPI, consumer prices have increased by 8.6% over the last twelve months. Frequent purchases like groceries, gasoline, and dining out have ballooned by even more.

The escalating pressure of inflation, including rising utilities, can jeopardize your financial stability – and your credit score. 

Consumers are paying more for, well, everything. This means there’s less leftover to save for emergencies, pay down debt, and invest in future financial goals.

As a result, many folks may become less resilient to unexpected expenses or loss of income. If the time comes to choose whether to buy groceries, keep the lights on, or pay your credit card on time – your credit score could take a hit. 

Rising inflation is all the more reason to be proactive about building credit. With good credit, you can lock in lower interest rates, higher credit limits, and even have better chances securing housing or new employment.

Since utility companies check credit scores, you’ll also pay less (or nothing) for a deposit when you open a new account. 

When money’s tight, it’s harder to afford a credit-builder loan or deposit on a secured card. Fortunately, you don’t need to spend even more to build credit. Now, you can use your existing expenses to improve your credit history – even your skyrocketing utilities bills. 

Explore: How Good Credit Can Help You Thrive During Record Inflation

Can you build credit with utility bills?

Most utilities companies don’t report to the credit bureaus, so simply paying on time won’t help your credit score. Fortunately, innovative tools like StellarFi allow you to build credit with your utility bills (and all your other monthly expenses). 

Millions of consumers pay their bills responsibly; but it rarely gets reported to the credit bureaus. This is one of the biggest flaws in our credit system. StellarFi is on a mission to make the benefits of good credit available to everyone. 

Simply link the bills you pay each month - like your rent, utilities, and even your Netflix subscription. StellarFi reports all your linked bill payments to the credit bureaus, and we optimize 100% of the factors that contribute to your credit score.

Signing up only takes a few minutes, and there’s no credit check. Take a look around and join StellarFi today!

The StellarFi blog is intended to serve as an informational resource. While StellarFi can help you build your credit, we do not provide financial, legal, or accounting advice. Please consult a trusted advisor for financial, legal, or accounting guidance as needed.

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On-time payment history can have a positive impact on your credit score. Nonpayment may negatively impact your credit score. StellarFinance, Inc. will report your on-time payments to Experian®, Equifax® and TransUnion®. Impact on your credit may vary, as credit scores are independently determined by credit bureaus based on a number of factors including the financial decisions you make with other financial services organizations.