Utility companies don’t submit your payment record to a credit reporting company, so your payment history is not included in your credit report. Missed payments can become part of your history if your utility company sells your account to a collection agency. Paying your utility bills with a credit card will place the amount on your credit record, but not the account – and you will need to be aware of the potential drawbacks of paying them with your credit card.
Why Don’t Utility Payments Appear on My Credit Report?
Your credit reports are compiled by three companies: Experian, Equifax, and TransUnion. Your creditors report your transactions and account status to one or more of these companies. No creditor is required to report your payment record.
A creditor that reports to one or more of the three credit reporting companies is subject to the Fair Credit Reporting Act, which gives customers the right to challenge incomplete or inaccurate information. Utility companies would rather not deal with additional regulations and potentially expensive resolution processes, so they don’t report your payment history. Your on-time payments will not help you build a good credit record.
Some credit companies have introduced products that claim to include a limited range of bill payment histories in your credit calculation. Any product offered by a single reporting or scoring company will only affect your credit report from that company.
Missed Utility Payments Can Affect Your Credit
Making utility payments on time will not help your credit, but missing payments can hurt your credit. Your utility company will not report a missed payment, but if your account becomes seriously delinquent, they may send it to a collection agency. The collection agency will usually report the account to a credit reporting company.
Your payment history is the single most influential factor in calculating your credit score. Collection items can have a serious impact on your credit. Even a single debt in collection status can have a significant impact on your credit. Your utility company does not have to notify you that your account is being sold to a collection agency.
Can Paying Bills With a Credit Card Help My Credit?
One way to put utility bills on your credit record is to pay them with a credit card. Your utility company won’t report them, but the amount you paid with the credit card will be included in your credit card payment history. If you have a limited credit history and seldom use a credit card, paying utility bills with a credit card may help you establish a credit record.
Consider paying your utility bills with a credit card under these conditions:
- You’re sure you can pay your balance off in full every month.
- Paying your utility bills will not push your credit card balance above 30% of your credit limit.
- Using your credit card will add substantially to your card rewards.
- You need to use your card to meet the minimum spending level for a signup bonus.
- You can schedule automatic payments to make sure you pay your bills on time.
- You have one card that you can use exclusively for paying bills.
Avoid using your credit card to pay utility bills under these conditions:
- You sometimes pay less than the full balance on your card.
- You’re using your card because you can’t afford to pay cash.
- Your utility bills will push your card balance above 30% of your credit limit.
Credit card balances carry very high-interest rates if you carry them beyond the due date, so you want to be very sure that you can pay those bills off on time. Credit card debt can quickly spiral out of control if you use your card to delay payments.
Credit utilization affects your credit. If your credit card balance is over 30% of your credit limit, you may damage your credit.
Not all utility companies will accept credit card payments. Some charge an additional convenience fee for card payments. Be sure to consider these fees when you’re deciding how to pay your utility bills.
Points to Remember
Paying utility bills on time won’t help your credit. Missing payments could do serious harm to your credit if the delinquent account is turned over to a collection agency.
Paying bills with a credit card can place the amount on your credit record, but you will have to pay your bills on time and stay aware of your credit utilization ratio and any fees that your company might charge.
Beware of any offer that claims to be able to use your utility payment record to improve your credit. It may be a credit repair scam!