Learn how to – Do Utility Bills Affect Your Credit?

Learn how to – Do Utility Bills Affect Your Credit?.

Paying your rent and utilities on schedule each month shouldn’t affect your credit score. Why? Your credit score won’t improve despite your prompt payment of rent and utilities because these businesses do not share this information with credit agencies.

Still, a bad credit score might result from not paying your bills on time, even though there are no incentives for doing so. Let’s look at an example to see what it means to have a utility billing solution. Imagine you have paid your power bill late. Your energy provider may seek a judgment against you if you fail to pay this account after it has been reported as delinquent to the credit bureaus. 

The firm will file a claim for the money you owe in small claims court, and a collection agency may be contacted to pursue payment from you for your unpaid power bill. Inaccuracies like these will lower your score when creditors see them. This means that the repercussions of a late payment might have a negative impact on your credit score, not the late payment itself. 

How Utility Bills Affect Your Credit

Late payments affect your credit score, which can have a ripple effect on your ability to borrow money, so it’s best to pay your bills on time to avoid these problems. If you want to steer clear of having to pay late penalties, have a negative impact on your credit score, and have a negative impact on your overall financial status, it is in your best interest to pay all of your bills on time. 

Many people nowadays use websites like Maxbill to pay their bills in advance. It shouldn’t be a big deal if a rent payment is late by less than five days. After that, there may be a late fee of 5% to 10% added to your rent. And if the rent is 30 days late or more, they have the option of notifying the credit bureau. Late payments affect your credit score in the following ways:

1. Fair Isaac Corp., the company that created the FICO scoring system, reports that if you already have a high credit score, a single late payment can drop it by as much as 80 points. 

2. Since lower credit scores already indicate a greater level of nonpayment risk, FICO argues that a single late payment would impact those ratings less.

One late payment on a bill for a landline or mobile phone, internet, or cable TV may not hurt your credit score, but this will depend on the service provider. But if you forget to pay your telecom bill more than once or just don’t pay it, your service provider may report this to one or more credit bureaus, which could hurt your credit score. 

You won’t see your water, gas, and electric bills on your credit reports unless you default, just like your telecommunications bills won’t. If you’ve been late on your utility bills so many times that the company has had to shut down your account and send your debt to a collection agency to try to get paid, write off your debt because it’s uncollectible, or charge you an early termination fee because it assumes you won’t pay it. 

If those bills go to collections or are written off, it could have a negative impact on your credit score. A negative entry on your credit report can be expected if the collection agency creates a collections account in your name and reports it to any of the three leading credit agencies. Negative information such as late payments, collections, repossessions, and foreclosures remain on a credit report for seven years, even if the debt is paid off. 

Many lenders still rely on antiquated credit scoring models when making loan decisions, despite the fact that some newer models no longer include settled collections accounts when calculating a borrower’s creditworthiness.

Conclusion

Paying your utility bill on time won’t do much for your credit score, but a late payment can have devastating effects, especially for those with high credit scores. To avoid having an accidental late ruin your credit score, you can look towards utility billing solutions like Maxbill to help you pay your dues on time.