How Gas Bill Payments Can Impact Your Credit Score

Paid your gas bill late last month? Missed an electricity payment or two? This won't be automatically reported to the credit bureaus that determine what loans you can get, but that doesn't mean you can relax completely.

Here, personal finance experts explain how not paying on time for your gas or other utilities can impact your credit score.

Do Any Utility Bills Impact Your Credit Score?

The answer is yes—if there has been a default on payment.

Consumers' bills for gas and other utilities are "rarely reported" to the credit bureaus while they're being paid on time, John Ulzheimer, a credit expert, told Newsweek.

Thomas Nitzsche, a personal finance expert and senior director of media and brand at Money Management International, also told Newsweek: "Utility bills in the United States are not reported to the major credit bureaus unless the consumer defaults on the payments."

A credit report next to red cup.
A credit score report on a table next to a cup of coffee. A bad score will make it more difficult to obtain a mortgage or other loans. iStock/Getty Images Plus

When the customer defaults, the utility company can send the delinquent bill to a third-party debt collector—also known as a collection agency—said Ulzheimer.

"The collection agency will then report the collection account to the credit bureaus, which, of course, can lead to lower scores," he said.

The outstanding bill will appear on the credit report within 30 days of being placed with the collection agency—if the consumer does not make payment, said Nitzsche.

Credit bureau Experian states that utility companies reporting such cases must comply with the Fair Credit Reporting Act, by regularly updating payment information and responding to disputes within legally mandated timeframes.

How Great Is the Impact of Not Paying Utility Bills?

Once a utility account goes into collection status, it can do "significant damage" to your credit score, Nitzsche said. A single collection account can decrease a credit score by as much as 110 points.

"The higher your initial credit score, the more points you will lose due to a collection account," because "the credit score algorithm deducts for a collection account based upon a percentage of the original score, not a flat point amount," he explained.

A person who already has a low credit score will lose fewer points, according to Nitzsche, but they should still be wary. "Keep in mind that 35 percent of the credit score is based upon payment history, so keeping a positive payment history and preventing collection accounts from being reported is critical."

According to Ulzheimer, "there is no single answer" to how great the impact of utility payment delinquencies may be on your credit score. It will depend on the rest of the information in the credit report. "The impact could be significant, if the credit report is otherwise clean, or immaterial if the credit report is already polluted with other negative information."

He said the collection can remain on the report for seven years from the date of the first delinquency. This is a "statutory requirement that applies to all furnishers of info to the credit bureaus."

An invoice stamped "Past Due" in red.
An invoice stamped with the words "past due." If a gas or other utilities account goes into collection status, this blemish could remain on your credit report for seven years. iStock/Getty Images Plus

Can I Rebuild My Credit?

"There is no universal answer" to how easy it is to rebuild your credit or how long that might take, Ulzheimer said. "It depends on the remaining information on the credit report. Could take years, could take less time."

Nitzsche said: "It usually takes much longer to improve a credit score than to damage it. The older the credit blemish, the less credit score damage it will do, but it will appear on the credit report for seven years."

He added that for people whose "credit report is 'thin' (not many trade lines), it is important to create new lines of credit to report positive payment history."

Consumers with low credit scores might need to take out a "secured credit card" or "credit-builder loan" from a local bank or credit union to build their score to a point where they can obtain traditional lines of credit, Nitzsche said.

Some credit bureaus allow consumers to improve their scores by reporting utility bill payments made on time, if the bill is paid through a bank account or credit card, he added. Experian Boost, for example, will assess bills for utilities, phones and even streaming services such as Netflix and Hulu.

Gas and electricity bills statements.
Utility bill statements scattered on a desk. Maintaining a positive payment history is crucial for your credit score. iStock/Getty Images Plus