If only every utility bill we paid was reflected on our credit report, we could all be walking around with perfect, flawless 850-level credit scores. Sadly, this is rarely the case, and most of the major and repeating expenses we incur month-to-month like rent, cable or cell phone bills aren’t usually reported to the credit bureaus that track borrowers’ behaviors.
No matter how diligently you pay these bills, whether it’s early, on time, in full or for more than you owe, those payments have little to no effect on your credit numbers — that is, unless you’re late or delinquent with your payment. If you’re in debt, or have little to no credit to your name, this poses a problem because no matter how on top of your expenses you stay, they do nothing to help your credit score.
We learned in a previous GOBankingRates Credit Score Challenge that there are some easy ways to get some of these expenses on board your credit report where they should be. When it comes to rent payments, for example, there’s an easy arrangement to get your positive rental payment behavior reported to the credit bureaus. By taking a similar approach with your monthly utility bill, you’ve now got a second way to boost your credit score.
Credit Score Challenge Week 6: Get Utility Bill Payments on Your Credit Report
For the utilities you have under your roof (like electricity, gas, water, phone landline or trash service), setting up credit reporting is fairly easy to do. “Getting your utilities to report may take some follow-through,” according to Angela Colley, a real estate journalist for Realtor.com. “Typically, a utility company will report your payment history if requested, but the company may report only once. If you want your information reported more often, you may have to make the request again.”
Experian, one of the three major credit bureaus, refers to this method of reporting utlities payment as “Alternative Payment Data.” Experian’s “Let There Be Light” study published earlier this year, revealed that adding positive utility payments to one’s credit report resulted in a wealth of financial benefits to the consumer. According to Colley, those include:
- 77 percent of respondents saw a credit score increase with utility payment considered, and the majority of scores were boosted by 11 points or more
- The share of consumers classified as subprime, with poor-to-fair FICO scores between 300 and 600, decreased by 47 percent
- A 54 percent increase in nonprime consumers with average credit scores between 601 and 660
- A 15 percent rise in people with above-average and prime credit scores above 661
Before getting excited with anticipation of raising your credit score, be prepared for your utilities provider to turn down your request. “In most states, providers aren’t obligated to regularly report payment histories to the major credit bureaus — in fact, there are significant disincentives for doing so,” writes Daniel Kurt of Investopedia. “In addition to being expensive, reporting to credit agencies makes the utility company subject to the Fair Credit Reporting Act. Most don’t bother with the potential legal fallout.”
If rejection ends up being the case, and there isn’t another utilities company in your area to switch over to, there are still a few quick and easy ways to pocket some savings on your utilities that can benefit your credit.
How Saving on Utilities Will Help Your Credit Score
There are some steps you can take to cut down on utility costs. Then, in turn, you can use the money you save towards paying down debt, which is good for your credit score. You can also use extra funds to make early and on-time payments that are reported to credit bureaus, which will reflect positively on your credit report. Combined with reporting your utility payments to the credit bureaus, the following tips to save on utilities gives you one more strategy to help improve your credit score.
1. Buy energy efficient appliances. “Energy Star-rated refrigerators, washers, furnaces and water heaters use a fraction of the energy their non-rated counterparts use,” according to Heather Levin of MoneyCrashers.
2. Modify your laundry habits. Wash your clothes in cold water — according to April Dykman of Forbes, this can save you up to $152 per year — and air-dry your clothes.
3. Turn off and unplug. Shut off lights, electronics and appliances when not in use, make use of power outlet strips, and keep computers and laptops on standby when dormant; the latter can save you $25 to $75 per year, notes Dykman.
4. Take advantage of rebates. Check with your utilities provider on special rebates and other discount offers to help you save money in the long run.
This article originally appeared on GOBankingRates.com: How to Improve Your Credit Score Using Your Utilities