Paying utilities does not always directly contribute towards building credit, but under the right circumstances, it can! Most utility companies don’t report payments to credit bureaus, but there are tools and services that can help you get credit for those on-time payments. These services include Experian Boost, eCredable Lift, LevelCredit, CreditMyRent, and RentTrack.
Wondering if paying your utilities can help build credit? It’s a smart question, especially if you’re looking for ways to boost your score without taking on new debt.
In this blog, we’ll break down how utility payments affect your credit, when they do and don’t count, and what steps you can take to make them work in your favor.
Understanding the Link Between Bills and Credit
While making your utility bill payments on time may not always directly help you build credit, failure to pay them can lead to negative consequences for your credit score, especially if they go to collections.
Let’s break it down – your utility bills typically cover basic household expenses like electricity, gas, water, and sometimes waste management. Although maintaining a positive payment history for these services may not directly affect credit scores, it’s still essential if you want your home to be a comfortable and functional place. Having your power, water, or gas turned off by your utility providers because of late or missed payments is never a good time.
Failure to make on-time payments towards your rent and utility bills can also lead to a collections account on your credit report, which can take years to recover from. Furthermore, consistently missing or failing to make utility bill payments can be a sign of financial problems elsewhere, which can definitely affect your credit report.
Do Utility Companies Report to Credit Bureaus?
No, typically, utility companies do not report to the major credit bureaus (Equifax, TransUnion, and Experian). Bills that aren’t typically included in your credit report include utilities, phone bills, insurance, rent, and streaming services.
However, just because these lenders don’t report to the three major credit bureaus doesn’t mean your utilities can’t affect your credit report. Unpaid loans, bills, or payments, including utilities, can negatively affect your credit score for up to seven years.
Furthermore, unpaid bills, even those that aren’t traditionally included in your credit report, such as rent and utility payments, can also end up in collections if left unpaid for too long. At that point, you would be responsible for negotiating the debt or working with a collection agency to pay off your balances. That’s why you want to avoid delinquent payments for all your financial obligations, including your utility bill payments, as much as possible.
Can Paying Utility Bills Affect Your Credit Score?
Yes! There are services available that allow consumers to benefit from their utility payment history on their credit report. These services report your payment history on utilities, rent, and sometimes even your phone bill, to the major credit reporting agencies. This can have a significant credit impact for people who are trying to improve an extremely low credit score, or for those who are new to finances and therefore have little established credit history.
People who may not see the biggest jump in their credit score from extra credit reporting services are those who already have an established credit history. Or, if you have multiple loans, credit cards, a mortgage, or other types of major credit accounts, making these on-time payments will have a bigger credit impact than credit reporting services that report utilities, rent, or cell phone bills.
How Experian Boost Works
One of the most popular services that helps consumers report their utility bills to credit bureaus is Experian Boost. The Experian Boost program helps consumers report utilities, cell phone bills, rent, certain streaming services, insurance, and more to credit bureaus.
Experian Boost will work best for people who are new to finances and are looking to add some bulk to their credit file, and those who don’t have much credit history. If you already have an established financial history, you may not see huge results in regards to your credit score by using Experian Boost alone.
Here’s a quick breakdown on how Experian Boost works:
- Sign up — The first step is to sign up for a free Experian account. You can do this from the Experian Boost page. Once you have an account, you can enroll in the Experian Boost program.
- Connect your financial accounts — Decide which credit accounts you want connected to your Experian Boost profile. You’ll want to add the accounts that cover the bills you want to include on your credit report.
- Identify what payments you want to report — After connecting your accounts, pick which payments within those accounts you want included on your credit report.
- Confirm reporting — Look over your accounts and the bills you selected, and confirm you want the creditors to report payments to the major credit bureaus.
That’s it! After that, all you have to do is keep paying bills on time and check your next credit report for improvement!
Something important to note is that not every type of payment is eligible for credit reporting with Experian Boost.
Pros and Cons of Experian Boost
Before spending the time to enroll in the Experian Boost program, consider the pros and cons.
Some advantages of Experian Boost include:
- FREE to join
- Potential to increase credit score for bills you already pay
- Adds positive payment history to credit score
- Add or remove bills from the service whenever you want
- Does not report late payments
Some potential disadvantages of Experian Boost are:
- May not significantly improve your credit score
- No guarantee of credit score improvement
- Must share personal information like your bank account info and social security number
- Does not fix negative credit report information
- Not all bills are included
Other Bills That Can Be Reported for Credit Building
Many credit reporting services allow users to report more than just their utility bills. Other bills that could be reported for credit building include:
- Rent
- Cable and internet bills
- Cell phone bills
- Landline phone bills
- Streaming services (like Netflix, Hulu, HBOMax, Amazon Prime, and others)
Keep in mind that not every credit reporting service will include each of these bills in its program. Some may include just certain utilities, and others may just include rent. Before signing up, make sure the service you go with includes all the bills and payments you want to add to your credit report. You may also sign up for more than one service if you like.
Other Tools That Report Utility Payments
Other services that help you report rent and utility bills to credit bureaus include eCredable Lift, LevelCredit, CreditMyCrent, and RentTrack.
Check out some details about these tools that report utility payments and more:
- eCredable Lift — Allows users to link up to eight types of utility bills, including power, water, gas, waste, certain mobile phones, cable TV, satellite TV, internet, and/or a landline phone.
- LevelCredit — Reports rent as well as other utilities and recurring bills.
- CreditMyRent — Helps renters build credit by reporting on-time rental payments to credit bureaus.
- RentTrack — Reports rent payments.
Other Tips to Help Boost Your Credit Report
A few more quick tips to help improve your credit include:
- Sign up for autopay — If you have trouble keeping up with your recurring payments, consider signing up for automatic payments. That way, you know all your due payments will go out on time without having to remember to manually submit each one.
- Avoid unnecessary credit applications — Every time you apply for a loan or credit card, the creditor will perform a hard credit check. Credit bureaus keep track of these official inquiries into your credit file and may dock your credit score a few points for each application.
- Pay off credit card balances — Try to pay off your credit card balances in full as often as possible. If having a $0 balance isn’t possible for you, try to keep your credit utilization at no higher than 30%.
- Become an authorized user — In lieu of getting your own credit card, you may opt to become an authorized user on someone else’s credit card. That way, you benefit from the available credit and have access to a line of credit, but are not solely responsible for paying back the balance.
- Diversify your credit profile — Credit bureaus like to see “good” types of debt, like mortgages or car loans, on your credit file. Avoid “bad” types of debt, which include products like payday loans, title loans, or no-credit-check loans.
For additional helpful tips and information about building credit, budgeting, and more, check out the CreditNinja dojo!
