Does paying my utility bills on time improve my credit score?

By Daniel Kurt AAA
A:

The bad news for consumers is that, typically, utility bills only appear on a credit report when they're delinquent. In most states, providers aren't obligated to regularly report payment histories to the major credit bureaus – in fact, there are significant disincentives for doing so. In addition to being expensive, reporting to credit agencies makes the utility company subject to the Fair Credit Reporting Act. Most don't bother with the potential legal fallout.
However, if you're significantly behind, a gas, electric or phone provider may send your account to a collection agency that could – and likely will – forward the information to one or more bureaus.



Of course, paying your bills on time will help your credit, insofar as the absence of "negative" items improves your score. But if you're looking to build credit, simply paying your gas, electric or phone bill on time usually won't do the trick. A more effective approach is to obtain a secured or unsecured credit card and use it responsibly. It's still a good idea to ask upfront whether the lender reports to all three credit bureaus – they usually do.



RELATED FAQS

  1. What are the requirements for an FHA loan?

    Qualify for homeownership with an FHA-backed mortgage. Borrowers with imperfect credit benefit from this government-sponsored ...
  2. How do I fix an error on my credit report?

    Take control over your credit report by disputing false claims, accounts and information to the three major credit reporting ...
  3. Does my debt-to-income (DTI) ratio affect my credit score?

    Though closely related, your debt-to-income ratio doesn't affect your credit score as directly as you might think.
  4. What counts as "debts" and "income" when calculating my debt-to-income (DTI) ratio?

    It's important to know your debt-to-income ratio because it's the figure lenders use to measure your ability to repay the ...
RELATED TERMS
  1. Credit Card Authorized User

    Definition of an authorized user of a credit card.
  2. Gray Charges

    Fees consumers pay via credit card or debit card for unwanted ...
  3. Credit Rating

    An assessment of the credit worthiness of a borrower in general ...
  4. Minimum Monthly Payment

    The smallest amount of a credit card bill that a consumer can ...
  5. Credit Card Balance

    The amount of charges, or lack thereof, owed to the credit card ...
  6. Good Credit

    A qualification of an individual's credit history that indicates ...
comments powered by Disqus
Related Articles
  1. 3 Money Moves To Make Before A Career ...
    Credit & Loans

    3 Money Moves To Make Before A Career ...

  2. 8 Common Refinance Mistakes
    Home & Auto

    8 Common Refinance Mistakes

  3. Are You A Target For Identity Thieves?
    Credit & Loans

    Are You A Target For Identity Thieves?

  4. Avoid Becoming An Identity Thief's Next ...
    Credit & Loans

    Avoid Becoming An Identity Thief's Next ...

  5. 9 Ways To Improve Your Credit Score ...
    Credit & Loans

    9 Ways To Improve Your Credit Score ...

Trading Center