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Do utility bills affect your credit score?

Utility bills aren’t something you may think of straight away when you think of things that affect your credit history.

But, despite not strictly being a form of credit like a loan or a credit card, they can be a key piece of information that helps lenders to work out if you’re a good person to lend to or not. How? Read on to find out.

How utility bills affect your credit report

If you have a standard, credit meter for your utilities like gas, electricity and water, then your accounts will usually appear in your credit report and be factored in when your credit score is calculated.

This is because with this type of meter, you typically use the power or water first, and pay for it later when your bill arrives. Your provider, of course, has already bought the electricity, gas or water that you use. So, in a way, they are lending you the money to pay for it, and when you pay your bill, you’re repaying what’s been lent to you.

Paying your utility bills on time can contribute towards a positive payment history that lenders will be able to see, and use as evidence that you’re a reliable person to lend to. So, as long as you pay your bills in full and on time, every time, they can help to improve your credit score.

Missing utility bill payments

If you miss a payment to one of your utilities providers, then this can negatively impact your credit report in the same way as missing a loan or credit card repayment. The more payments you miss, the greater the negative effect will be, as it can be a sign that you’re experiencing financial difficulties.

Any lenders you apply to will be able to see that you’ve missed payments, and it may cause them to decide not to lend to you.  

Joint utilities accounts and your credit report

If you and another member of your household – like your partner or housemate – are both named account holders with your utilities provider(s), then this can make you financial associates. If you also share other joint credit accounts like a mortgage, bank account or credit card with this person, then you may already be financially connected through these accounts.

However, if you generally keep your finances separate from others you live with, being jointly named on your utilities accounts could create a new financial association between you.

Financial associations don’t affect your credit score directly. But, the name of your associate will appear on your credit report, and their credit history may be taken into consideration alongside your own as and when you apply for credit.

If their credit history is good, then it won’t usually make you more likely to be approved for credit. If their credit history is poor, though, then this may reduce your chances of being approved for credit, even if you’re applying by yourself.

The reason this can happen is because if your financial associate has a history of not keeping up with their payments and their half of your shared bills, it may fall on you to help them by paying their share. This could impact your own ability to keep up with your payments, or affect the amount of borrowing you can to afford to repay. So, if you’re financially associated with somebody, lenders may consider how their situation impacts yours when making a decision on your application.

Prepayment meters and your credit report

If you get your electricity and/or gas through a prepayment meter, then this won’t usually be included in your credit report. That’s because you pay in advance for your energy, and there’s no credit involved. Once you’ve used the energy you’ve paid for, you have to top up your meter again to buy more power.

If you live in a property with a prepayment meter and would like to change it to a credit meter then this can usually be arranged for you through your energy provider. As well as meaning that your account and payments will be included in your credit report, and so boost your credit score (as long as you make your payments on time), switching to a credit meter can give you access to a wider range of tariffs, providers and deals. However, to be eligible to switch from a prepayment meter to a credit meter, your energy account will need to be debt-free, and you may have to undergo a credit check to make sure the types of tariffs available on a standard meter are suitable for you.

If you rent your home, you may need to ask for the landlord’s permission before you swap the meters, but they shouldn’t withhold permission without a good reason.

You may also need to pay a fee to your energy provider to cover the cost of changing the meters. Whether or not a fee is charged, and how much it is, is down to the provider. If yours charges a fee, you can consider switching to one that doesn’t.

Contributing towards bills that you're not named on the account for

If you pay a contribution towards your household utility bills, but the account is in someone else’s name, then the accounts won’t appear in your credit report and, assuming the bills are paid on time, you also won’t get any of the credit score benefits that come with that. So, if you’re aiming to boost your credit history, then having your name added to your utilities accounts can be a good thing to do.

Remember, though, that this could create a new financial association between you and the existing account holder, and as we discussed earlier, this can affect your eligibility for credit should you need to borrow.