Sometimes, making ends meet is difficult. Whatever the cause, whether it’s a financial shortfall beyond your control, or you made a spending decision that’s giving you second thoughts, you may be discovering that your unpaid utility bills are affecting your credit score.
Here, we’ll examine how that works, and what you can do to come back from a negative credit score on your utility account.
Traditional Credit Score
Usually, when we talk credit scores, most people think about the FICO score from one of the big three credit reporting agencies. These agencies collect different data points and your payment history to help lenders decide your credit risk before they extend credit via, say, a car loan or a new credit card.
However, it’s important to understand most utility companies don’t report your on-time payments to the big three credit reporting agencies. That means on-time payments for your electric bill aren’t going to boost the credit score that measures your credit-worthiness.
- Late payments: It’s a different story if you fall behind on your utility bills, especially if your account is sent to a collection agency.
- What happens? When your utility account goes to collection agency, the company could report this to the big three credit reporting agencies. For you, that could result in a lower credit score, which can affect the interest rates available to you or even your ability to borrow money.
Second Credit Score
What if your FICO score is fine, but you were told by the utility company that you have a negative credit score? Perhaps you even have to pay a hefty deposit to power your home. So what’s going on with your credit?
- The utility network: Many utility companies belong to a network where they share payment information about their customers: The National Consumer Telecom & Utilities Exchange.
- How does the NCTUE work? If your utility or phone company is a member of this network, they’ll do a quick background check based on your payment history with other companies in the network.
- What happens? Those with late payments or non-payment on their NCTUE report may be denied service or asked to pay a deposit.
Regain control of your credit score
So you’ve been asked to pay a deposit because of your credit. But what if you could regain control of your electricity expenses and rebuild your credit? One option that may be available to you is prepaid electricity.
How does it work? First Choice Power’s Power to Go program is a super simple way to get Texas electricity while putting you in control.
- Set it up: With no deposit, no credit check and no long-term contract, you can create and set up an electricity account.
- Pay as you go: Pay for electricity ahead of time, as you need it, on your schedule, whether it’s by phone, in person or online, and you get service.
- Keep track: As you go about your week, check the app or your online account to monitor your energy usage and how much you have left. On top of that, you’ll receive text alerts when your “bank” of electricity reaches a certain level, so you can plan and replenish your account before you run into a negative balance (and service is cut off). There are no surprise bills or late fees!
- Bonus! On top of all that, you could get free weekends. Which means you can save up your high-powered activities, like laundry, binge-watching and baking, while keeping kilowatts in your bank.
- Bottom line: Using prepaid electricity is a great way to establish or rebuild your credit and get electricity without paying a deposit!