Getting Utility Services: Why Your Credit Matters

Getting utility services ― gas, electricity, water ― has a lot to do with your credit history. The better your credit history, the easier it is for you to get services. And your on-time (or late) payment history with utility companies is an important factor for your credit in the future.

Applying for Utility Services Is Applying for Credit

If you’re moving into a new apartment or house and need to set up utilities, you’ll have to apply for those services. When you apply, companies often look at how you’ve paid your bills in the past, including how you’ve paid bills for utilities where you’ve lived before.

Here’s what to know when you apply for utilities:

• You’re applying for credit. Utility companies send you a bill at the end of the month based on how much gas, electricity, or water you use. That means they’re extending you credit for their services until you pay your bill.
• Companies will look at your credit history. Like other creditors, utility companies will ask for information like your Social Security number so they can check your credit history. A good credit history makes it easier for you to get services. A poor credit history makes it harder.
• How you pay your utility bills becomes part of your credit history. If you pay your bills in full and on time, it helps your credit. If you don’t, it hurts your credit. Failing to pay on time can also lead to collections and charge-offs — unpaid debts that creditors can write off as losses — which damages your credit. Not paying on time also can affect whether you can get other types of credit.

Read Understanding Your Credit to learn more.

When You Might Need To Pay a Deposit or Get a Letter of Guarantee

If you’re a new utility customer, or if you’re an existing customer with a poor payment history, the utility company might say you have to pay a deposit to get new service. Or they might ask you to get a letter from someone who agrees to pay your bill if you don’t. This is called a letter of guarantee.

Here are a few things to know:

• Generally, the company must treat everyone the same. The company’s policy for requiring deposits or letters of guarantee must be the same for all customers. If you’re a new customer, the company can ask you for a deposit or letter of guarantee if their policy is to ask all new customers for one, or if their policy is to ask anyone whose credit history is poor for one.
• You’re not a new customer if you’ve already had an account with the utility company under your spouse’s name. If you’ve had utility services under your spouse’s name at places you’ve lived before, a utility company can’t ask you to pay a deposit or get a letter of guarantee.
• Your spouse’s utility payment history could affect whether you have to pay a deposit or get a letter of guarantee. If the company’s policy is to ask for a deposit or guarantee letter if a customer’s credit is poor, the company will consider your spouse’s late payment history — even if your own utility payment history is fine.

The Equal Credit Opportunity Act (ECOA) gives you a chance to prove that your spouse’s bad credit doesn’t mean you’re not going to pay your bills. You may have to show that

• you didn’t live with your spouse when their account was overdue,
• you never saw the bills, or
• you paid the bills once you discovered they were overdue.

If you can’t prove any of these things, the company may ask you to pay your spouse’s old debts, pay a deposit, or get a letter of guarantee before your service is connected. The company’s right to do this is governed by state law, not the ECOA. Contact your state consumer protection office for more information.

Your Rights if You’re Denied Utility Services

You have the right to know why the utility company denied you service. The company has to send you an adverse action notice within 30 days of its decision, telling you the specific reasons why they denied you service — or saying that you have the right to know those reasons and to see information being reported about you. You then have 60 days to send them a written request for them to tell you those reasons. Adverse action notices also tell you about your right to correct inaccurate information.

You also could contact your state or local consumer protection office to check on your rights under state law. Read Did a Lender Offer Less Favorable Terms or Deny You Credit? to learn more about adverse action notices.

What To Do if You Have Problems Paying Your Utility Bills

If you’re behind on paying your utility bills — or you expect to be — contact the utility company immediately. You might have the following options:

Payment arrangements

Often, companies won’t shut off your service if you pay part of the overdue bill now and agree to a plan to catch up on your payments over time.

Before you agree to a payment arrangement, keep these things in mind:

• The company might require you to pay your future bills — on time and in full — while you also pay off your past due balance. Only make this arrangement if you’re able to pay both. If you don’t make payments as agreed, the company might disconnect your service and might not agree to any other payment plans in the future.
• Your make-up payments are still considered late. Find out the company’s policy for reporting late payments to credit bureaus when a payment arrangement is in place. This will help you know how the arrangement might affect your credit history.

Some states have rules for when a utility company shuts off your service. Contact your state or local consumer protection office to find out if that’s the case where you live.

Budget billing plans

A budget billing plan lets you pay a flat charge each month for services. It’s based on an estimate of what you’ll use each month, usually based on your past usage. Before you decide to accept a budget billing plan:

• Take a look at your prior usage and monthly payments to see if the plan makes sense for you. A budget billing plan helps you avoid monthly spikes when usage is high — like in winter or summer — and lets you plan your monthly expenses. But if you go over the estimated usage, you’ll have to pay extra at the end of the year. Consider whether you’ll be able to keep the utility usage within the amount estimated. And if you had to pay extra because you used more than they estimated, consider reviewing your budget billing plan agreement at the end of the year.
• Ask about fees and credits. Ask if the plan charges administrative fees, how much they are, and when they are due. Also, find out if you’ll get a refund if you use less than expected or if this will become a credit on next year’s bill.

Lowering your usage

Many utility companies offer advice on how to conserve electricity, water, and gas. Look on the company’s website or in their bill inserts or brochures.

Consider an energy audit. This involves finding out where you’re wasting energy and how well your heating and cooling systems work. The U.S. Department of Energy offers a do-it-yourself energy audit tool to help you do this.

Get more energy saving advice from your state consumer protection agency and the U.S. Department of Energy.

Read How to Save Money on Heating and Cooling Your Home to learn more.

Spot and Avoid Utility Scams

Scammers often pretend to be utility companies to steal your money. They might contact you with a call, text, email, or in-person visit and threaten to turn off your gas, electric, or water service if you don’t pay immediately. Scammers will often insist you only pay by wiring money through a company like Western Union or Money Gram, using cryptocurrency, using a payment app, or by putting money on a gift card and then giving the numbers on the back of the card. These scammers want to scare you into paying before you have time to confirm what they’re telling you. Real utility companies don’t do this.

Read Scammers Pretend To Be Your Utility Company for advice on how to spot, avoid, and report utility scams. And if someone used your information to get utilities, contact the utility company and tell them someone stole your identity. Ask them to close the account. Then report the utility identity theft at IdentityTheft.gov.