Does Paying Your Energy Bills Help Your Credit Score?

can i get electricity with bad credit

Utility bills are a form of credit, which many may not realize. Your utility company and the power provider track your utility payments and make a profile of you as a regular paying customer. This type of profile, or credit history, can then interfere with your future utility bills, setting up additional utility services, and even your ability to switch your utility providers. This means that tardy payments for a utility service can have a negative impact on your utility bill, deposits, as well as the pricing you get. Let’s find out more. 

What Is Credit?

Credit is, simply put, a provision of money or service in advance. This is done with the expectation of payment. For example, when you purchase a house using a loan, you can use the house while paying off the contract. Similarly to this, your utility company offers to provide you with a specific service, and you pay after you’ve used the service. 

For example, when you use electricity, you use it first and pay for it later on. The only exception to this common practice is the prepaid plans and pay-as-you-go energy plans. The situation is similar with your water, sewage, and recycling utility company. As you make your utility bill payments, the credit is set back to zero, only to be reinstated after the meter readings have taken place. 

What Are the Types of Utilities?

There are several types of utilities. Depending on where you live and what utility services are offered in your area, you may have upward of five utilities. Most households in the US have the following utilities that they should make regular monthly payments to: 

  1. Electricity, 
  2. Water, 
  3. Gas, 
  4. Phone, 
  5. Internet, and
  6. Cable. 

What Is Utility Credit?

Having a contract and an account with a utility company means having credit with that same company. This means that your utility provider agrees to let you use their products (such as natural gas) or services (power, water, sewage, Internet, cable TV, etc.) for a month before requesting a payment. 

Your utility provider can request a payment based on a fixed fee (such as for Internet access and cable TV) or based on meter readings and your actual consumption (natural gas, power, water, and sewage). Your utility company keeps a record of your payments, as well as your amount due at any point in time. This credit report helps the utility company better understand how able you are to pay your bills. 

Effects of Utility Bills on Your Credit

Your utility bills can have a big impact on your credit history. Similar to any other loan payments, your utility companies can report any tardy payments to a credit bureau. This does not mean that a single missed or late payment will be reported to the major credit bureaus, but accumulated due bills can do so. Unfortunately, regularly paying your bills can only somewhat improve your credit score and credit history report, so if you want to increase your score, you may need to refer to other means. 

Utility Company Requirements

Utility companies, in general, have a few requirements before they set up a service for you. What they do is run a credit history check. During this process, they may look for any late payments, amounts owed to other utilities, and any other check-points they may consider important. They also check with other creditors, such as banks, before accepting any new customers. 

Utility Contracts

Your utility contracts represent a special type of credit called an open credit. This means that the credit amount is established throughout the month (as you use your utility service) and is to be paid, in full, by the end of the month. In case your payment is past the due date, you may also have to pay a late fee or interest on the number of loans owed. Occasionally, utility companies may allow a tardy payment with a beforehand notification, but only for specific reasons that every utility decides by itself.


Your utility company will check your credit score and payment history to determine how able you are to pay your bill. In most cases, you will be required to pay a deposit amount or get a letter of guarantee from a friend or a family member (usually someone who does not live in the same household) to ensure that the services can be set up if you are required to pay a deposit. 

Beware that the deposit amount asked for by the lenders (the utilities) cannot exceed 16% of your annual consumption. People with a very good credit history and a score of over 750 may not be required to make a deposit. Although your utility can determine your deposit amount freely, if the amount is too high or low on a discriminatory basis (such as sex, marital status, etc.), it is considered illegal and should be reported. 

Impact of Poor Credit Scores on Utility Bills

If you have a poor credit history and score, and you believe that you need more time and funds to make your credit file look better, you should know how bad credit history can interfere with your utility bills. Any new customers who want to set up an account with a utility will go through a credit check. If the person’s credit score is low, they may be required to pay a higher deposit amount or to get a letter of guarantee. 

How To Improve Your Credit Score?

There are several ways to improve your credit score. When trying to understand how to improve your credit score, it is important to note that there is no magical formula. It takes time and financial discipline to ensure that your score keeps rising year after year. Companies know this but have to take credit history into consideration when setting up their contract with you.

Make On-time Payments

You should always make your payments on time. The best thing to do is make a list of all the debts you may have. List every utility account and add in the amount owed each month for a larger loan, such as car and mortgage payments. Set aside this amount every month and pay the bills as soon as you get them. 

Pay Your Debts

Paying off your debts should be a number one priority. Not having any debt may seem like a dream, especially to the freshly graduated who have purchased a home. If you have any debt, including credit card debt, you should focus on paying it off as soon as possible. Debt can affect your credit score in a very negative way. 

Maintain a Low Credit Utilization Rate

Every person has a certain credit threshold. This means that you cannot borrow more money than this threshold says you can. To increase your credit threshold, you should increase your credit score. Having a low credit utilization score improves your credit history significantly. 

Open New Credit Accounts When Needed

Do not open more credit accounts than you need. Today, it is possible to get credit for pretty much everything. However, maintenance fees and monthly fees to be paid only add up and draw from your available balance. To keep expenses and debts subject to report with a collection agency or a credit bureau under control, do not open more credit accounts unless they are essential. 

Avoid Closing Down Unused Credit Cards

Closing an unused credit card can decrease your credit threshold and increase your credit utilization rate. To avoid this, do not close your old credit cards, but also be responsible for how you use the money and how you manage your accounts. Being able to pay off the credit on time also means increasing your credit score. 

How To Determine Your Credit History?

If you are trying to determine your credit history, know that there are at least two things to consider. The first one is your own credit history. The second is your spouse’s credit history. Combined, these two will give you an idea of how high your score is. Let’s read on to see why your spouse’s history is so important. 

Sometimes, even customers with a high score may be required to pay a deposit, similar to users with a low score. This is often a point of confusion but easy to clarify. If your spouse has a low score, it may be taken into consideration by the utility company. This means that you will not be able to get a deposit-free energy plan as you had hoped. However, if you manage to prove that you did not live together at the time (a long business trip, separate vacations, etc.), you may be able to get the deposit burden off your chest. 

What Should You Do If You Can’t Pay Your Utility Bills?

If you cannot make a payment on time, the last thing that you should do is simply not pay it. Your utility services should know that you may have to breach the due date. They may also need to know that your account does not need to be reported to the credit bureau. Sudden expenses, the loss of a loved one, or one-time high medical bills can all interfere with your paying power. Make sure that your utility company knows this so that you can undertake one of the following actions: 

Make Payment Arrangements

Payment arrangements allow you to take the amount owed and divide it over the course of several months. Although this action may seem minuscule, the utilities will keep running, and you will not be left with no water or electric power. Your company will require that you pay all your future bills, on time and in full, during the period of paying off your tardy bill. 

Follow Budget Billing Plans

If the biggest obstacle to paying your lights plan is the rising energy use (such as during summer or particularly cold winters), you may want to consider a budget billing plan. Under this type of plan, your annual energy use is divided into 12 equal installments that you should make. This allows the companies to always have the same source of revenue and you to plan your budget more easily and with less hassle. 

Find Ways To Lower Electric Usage

There are many ways to lower your electric usage. Many companies will offer advice that guarantees a lower power bill. If you would like to obtain such professional help, head over to your utility website and check how you can affect your power consumption. If you would like to be a responsible consumer and monitor your energy use more closely while also saving the planet’s resources, you should take the following steps: 


What can help build credit?

Building credit is easy, but it takes time. To increase your credit score, you should take low credits (usually via your credit card) and pay them off in time, budget regularly so that no utility payments are late, never close your old credit cards, and prioritize paying off your debts. Your credit score will slowly increase over time, allowing you to take on more loans, pay fewer deposits on your utilities and enjoy the perks of lower interest rates. 

Which loan terms will result in the highest total cost for the loan?

An adjustable-rate mortgage will result in the highest total cost for your loan. In any case, when it comes to your utilities, the credit you get is considered an ‘open credit.’ This means that you should pay it off in full, so it cannot affect your credit. In case of tardy payment, you may have to pay a late fee, or your account may be suspended. 

Is credit card secured or unsecured?

Credit cards can be both secured and unsecured. The difference is that an unsecured card does not require you to fund it, while a secured card does. This means that a secured card has a withdrawal limit that is equal to the deposit amount you have placed on it. You can contact your local bank to learn more about this type of credit card. 

What are the 4 types of credit?

There are several types of credit. The four most common types of credit are revolving credit, charge cards, installment credit, and service credit (also known as non-installment credit). The revolving credit imposes a limit that can be rolled over to the next month, risking high credit debt. A charge card, such as American Express, limits this, as you should pay the entire amount owed by the end of the month. An installment credit means that the amount owed is returned in equal monthly installments, and a non-installment means that paying is simply postponed to a later date, usually for recurring payments. 


Your utilities represent a kind of credit. You first use your utilities (natural gas, power, water, etc.), and then you pay for them. As with any other type of credit, the payments should be made monthly and in full. To avoid tardy payments and decrease the chances that your credit history is badly affected, follow our advice and ensure low deposits and no letters of guarantee before setting up your utilities. 

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