Beatrice Lang
Utility companies may pull a soft credit check on new customers to examine their bill payment history and decide whether to approve their application. This is to ensure that the customer is likely to pay their bills. However, this soft credit check does not affect your credit score. Utility bills typically do not appear on a credit report unless they are delinquent and referred to a collection agency.
| Characteristics | Values |
|---|---|
| Do electric companies pull your credit score? | Yes, some utility companies run credit checks on new customers to determine their bill payment history and whether to approve their application. |
| Type of credit check | Soft credit check or soft inquiry |
| Impact on credit score | Soft credit checks do not impact credit scores |
| Reporting to credit bureaus | Utility companies do not report on-time payments to credit bureaus. However, delinquent payments may be reported to credit bureaus and can damage your credit score. |
| Improving credit score | Paying utility bills on time does not improve your credit score. However, Experian Boost is a service that allows you to include utility payments in your credit score. |
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What You'll Learn
Electric companies use a soft credit check
Utility companies, including electricity providers, often run credit checks on new customers to assess their bill payment history and decide whether to approve their application. This is known as a soft credit check or soft inquiry.
A soft credit check occurs when you or someone you authorise checks your credit report without your having applied for credit. It is primarily used to screen for preapproval financing offers or for background checks. Soft credit checks do not affect your credit score, which is a numerical representation of your creditworthiness that creditors use to determine whether they should extend credit to you.
Electricity companies use soft credit checks to determine whether a customer is likely to pay their bills. They are extending credit to the customer by providing services before receiving payment. Checking a customer's credit gives the company a snapshot of their bill payment history, including whether they have made timely payments.
Soft credit checks can provide valuable information without damaging your credit score. However, to officially apply for credit, a hard credit check is required. Hard credit checks can temporarily affect your credit score, particularly if you have multiple checks in a short time frame.
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Utility companies don't report good payment history
Utility companies typically do not report good payment history to the credit bureaus. They only report to the credit bureau when you don't pay your bill. This is because, in most states, providers aren't obligated to regularly report payment histories to the major credit bureaus, which include TransUnion, Experian, and Equifax. Reporting to credit agencies also makes the utility company subject to the Fair Credit Reporting Act, which they may want to avoid due to the potential legal fallout.
However, if you are delinquent in paying your utility bills, the utility companies could report the late payments to the credit bureaus and your credit score could decline. In this case, your debt may be forwarded to a collection agency, which is likely to report the information to one or more of the credit bureaus.
While utility companies do not report good payment history, they may still run credit checks on new customers so they can see their bill payment history and determine whether to approve their application. This is known as a soft credit check and will not hurt your credit score.
Despite utility companies not reporting good payment history, there are still ways to improve your credit score using your utility bills. Experian Boost is a service that allows you to include utilities like streaming services and even rent payments in your credit score.
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Delinquent payments can lower your credit score
Delinquent payments can negatively impact your credit score. A delinquent payment occurs when a consumer falls behind on making required monthly payments. While being 30 days late is generally considered delinquent, it usually takes two months of delinquent payments before the information is reported to credit reporting agencies. However, the longer you wait, the heavier the hit to your credit score. After three missed payments, your credit score may fall by as much as 180 points. Once four payments have been missed, the impact on your credit score will become even more severe, and your account will likely be turned over to a collection agency.
Utility companies, including electricity providers, may run credit checks on new customers to determine their bill payment history and whether to approve their application. While utility companies generally do not report your bill payment activity to the three major credit reporting agencies, delinquent payments may be reported, and this can lower your credit score.
If you are struggling with delinquent payments, there are a few things you can do to remedy the situation. Firstly, try to bring your account current as soon as possible. You can also contact your lender to discuss hardship options, such as lowering your minimum payment or temporarily deferring your payment. Additionally, you can use a service like Experian Boost to include your utility bills in your payment history and potentially improve your credit score.
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Experian Boost can help improve your credit score
Utility companies may run credit checks on new customers to examine their bill payment history and decide whether to approve their application. However, this is usually a soft credit check, which does not affect your credit score.
Experian Boost is a free tool that can help you improve your FICO® Score by giving you credit for on-time telecom and utility payments. It works by allowing you to link your bank accounts, after which it will identify qualifying on-time payments and add them to your credit file. Late payments are ignored and will not hurt your score.
Over 840,000 Americans have used Experian Boost to improve their credit scores by an average of 13 points. However, some people have expressed concerns that it may hurt more than it helps by increasing your debt-to-ratio, causing finance companies to lend you less money.
If you want to use Experian Boost, you will need to create a free Experian account and link the bank accounts you use to pay your bills. Experian Boost will then identify eligible accounts and retrieve up to two years of payment history. You will then be able to confirm that you want this information added to your Experian Boost list.
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Hard inquiries can lower your credit score
When a lender or financial institution checks your credit score as part of a lending decision, it is known as a "hard pull", "hard credit check", or "hard inquiry". These hard inquiries occur when you apply for a loan, credit card, or line of credit, and they can negatively impact your credit score.
Hard inquiries are considered more significant than soft inquiries because they indicate that you are actively seeking new credit, which could increase your debt burden. While a single hard inquiry will usually result in a small drop in your credit score, having multiple hard inquiries in a short period can have a compounding effect. Lenders view multiple hard inquiries as a signal that you may be taking on substantial debt, making you a riskier customer.
However, it's important to note that the impact of hard inquiries is usually minimal and temporary. Hard inquiries typically stay on your credit report for about two years, but they only affect your credit score for 12 months. Additionally, when you're shopping for specific types of loans, such as car loans, student loans, or mortgages, multiple inquiries within a set period (usually 14 to 45 days) are often treated as a single inquiry.
To minimize the impact of hard inquiries on your credit score, it's best to space out your credit applications and maintain good credit behaviour. By doing so, you can recover from any small drops in your credit score and maintain a positive credit history.
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Frequently asked questions
Yes, some utility companies run credit checks on new customers to determine their bill payment history and whether to approve their application. However, this is a soft credit check and will not hurt your credit score.
A soft credit check or soft inquiry is when a prospective lender sends a preapproval offer or an existing lender runs a credit inquiry during a routine account review. A soft inquiry doesn't affect your credit score.
Strategies to boost credit scores include repaying debt on time, keeping debt utilization ratios low, and paying off debt. You can also use a service like Experian Boost to include utility bills in your payment history and improve your credit score.
Utility companies typically do not report to the main credit bureaus, which include Experian, TransUnion, and Equifax. However, if you are delinquent in your payments, the utility company may send your bill to a collection agency, which can appear on your credit report and damage your credit score.
