Opening a new utility account can be an intimidating process, especially if you have a low credit score. A utility credit check normally reveals your credit score and any delinquent payments.
However, there are ways around it. This article will discuss getting utilities with bad credit in greater detail. Let’s explore.
What Is a Utility?
A utility includes services like gas, electricity, water, sewer, and garbage pickup. It may also include phone service, cable, or internet. The cost of utilities depends on several factors, such as:
- Home size
If you have bad credit, you might have to pay a deposit for utility services.
Can a Utility Company Deny You If I Have Bad Credit?
Utility companies cannot deny your application if you have a less-than-perfect credit score. Under most state laws, utility providers must provide service to people who are willing to pay for it.
However, they can usually deny service if you have had delinquent accounts.
If you have a low credit score, you might pay a higher utility deposit. Utility deposits are lump sums you pay to the utility company and are a projected summation of your bill each month.
There is no exact figure, but the amount can range from $100 to $250.
In other cases, the utility carrier may ask for a letter of guarantee, which is a written statement from another person who vows to pay your utility bill if you fail to do so.
Why Would Utility Companies Make You Pay a Deposit?
Utility officials see a bad credit score as a risk. To hedge against the risk that you won’t pay your bill on time, the company will charge a deposit.
Does a Utility Credit Check Affect My Score?
Officials at the utility company issue a soft credit pull, which doesn’t affect your score. They primarily look at your payment history with other utility companies.
Your deposit will be higher if you have an outstanding balance with a previous utility company. The providers also look at your overall score to assess your payment history.
Do Utility Payments Increase My Credit Score?
Since most utilities don’t report to the three major credit bureaus, timely payments have no impact on your score. However, delinquent payments usually impact your score negatively.
That said, you can include on-time utility payments in your credit report with Experian Boost (add link).
With this program, you’ll grant Experian access to your bank account. From there, Experian can record the positive payments deducted from your personal account and note them on your credit report.
Based on Experian’s data, 75% of Boost customers with a score of less than 680 saw an improvement in their scores. Best of all, most lenders recognize Experian Boost scores.
This feature is only available through Experian, so it doesn’t apply to TransUnion or Equifax scores.
How Can You Avoid a Security Deposit?
The best way to avoid a utility deposit is to improve your credit score. Increasing your score isn’t as long and arduous as you may think.
In many cases, you can raise your score in one or two months. However, enhancing your score may take longer depending on your credit profile. You can raise your credit score in the following ways:
- Address late accounts and make them current
- Correct errors on your report
- Lower your debt to available credit ratio
- Pay bills on time
- Keep your balances low
Remember, timely payments comprise 35% of your overall credit score assessment.
You should also scrutinize what’s on your report, as errors can cause lower scores. To review your report, you can request a free annual report from all three bureaus (add link here).
Then, scan them for irregularities and dispute anything that’s wrong. Look out for the following problems:
- Fraudulent Activity: This is at an all-time high. You could be the victim of identity theft and not know it. Look for any accounts opened without your authorization
- Incorrect Information: Reporters may have mixed your identity with another person. Also, they could misreport other details, such as your Social Security Number, previous addresses, or birthday
Take time to boost your score before applying for a utility. A good score could waive a deposit. It’s worth noting you may still have to pay a deposit even with a good score.
Utility Credit Check: Bottom Line
Overall, a utility credit check is nothing to fear. Utility companies won’t deprive you of utilities if you have a low credit score. However, they can charge you a security deposit. You can avoid or lessen this by boosting your credit score.
Raising your credit score doesn’t take long in many cases. Settling delinquent accounts and making timely payments will boost your score sooner rather than later.
We hope this gives you information and action items that helps you understand what goes into a utility credit check.