Can you imagine that a dripping faucet might keep you from buying a car? Can you imagine that your air conditioner might keep you from buying a house? Can you imagine how your cell phone might cost you thousands of dollars in interest on a higher mortgage?
“Impossible” you might say.
Think again! Those things are entirely possible, and even probable! Here’s why: Your credit reports are made up of several pieces of information about you flooding into the credit reporting agencies. You probably already know about some of the information — your home address, credit cards, payment histories and bankruptcies. Many consumers are surprised, however, to discover one piece of information that they didn’t know was being reported on their credit reports, yet this information can severely hurt credit scores if you are not careful.
Unpaid utility bills are now being reported pretty consistently on credit reports. Your phone bill, power bill and water bill (and other utilities you might have) could show up on your credit report and therefore will influence whether or not lenders will loan you money.
So that dripping faucet might run up your water bill, hurt your credit if you pay late, and keep you from getting a car loan. And that air conditioner running through the summer might run up your power bill, hurt your credit if you pay late, and keep you from getting a mortgage. And that cell phone might run up your cell phone bill, hurt your credit if you pay late, and bump you up into a higher interest rate bracket on your mortgage.
It might be tempting to skip a payment now and then or not pay on time, especially if money was tight and you needed to direct your funds elsewhere. But it’s important to pay those utility bills on time — not only to keep your utility providers happy but also to ensure that you keep future lenders happy as well!
Here are some tips to help you handle your utility bills to make sure that they don’t hurt your credit score:
- Watch your bills closely and mark on a calendar when they should be paid.
- If you want to minimize the number of utility bills that impact your credit report, see if you can bundle services (i.e. your telephone service provider may also provide you with Internet services)
- Reduce the number of times you switch service providers because they may pull your credit report each time you switch.
- Ask your utility provider if you can get on fixed average payments so that your bill each month is a predictable amount. This will keep you from getting surprised after a month of particularly high utility usage.
Not every utility is reported, but I am seeing an increasing number of utilities reported so consumers who are smart about their credit should manage their utility bills in the same way they manage other credit-impacting accounts like loans and credit cards.
Image: Jeff Drongowski, via Flickr