Can Timely Utility Bill Payments Help Your Credit Score?

You may not like the answer.

Your credit score is an important number, namely because it tells borrowers how much risk they're taking on in loaning you money or extending credit to you. If your credit score is high, it sends the message you can be trusted with a line of credit or loan. And as a result, a credit card company or lender might reward you with a lower interest rate on the sum you're borrowing.

A poor credit score, on the other hand, tells lenders that you're more of a risk. And so you might get stuck paying a higher interest rate on a loan if your credit score isn't in the best shape. Or, you may be denied the option to borrow altogether.

Now, there are different factors that go into calculating your credit score. But the factor that carries the most weight is your payment history. If you have a history of paying your bills on time, it gives lenders more confidence in your likelihood to repay a loan. 

However, not all bill payments are reported to the credit bureaus that determine your credit score. While it's a good idea to be on time with your utility payments, doing so may not help bring your credit score up.

Utility bills generally don't count

Utility bills are something many people pay on a monthly basis, so you'd think they'd be counted in the context of your credit score. But actually, most utility companies don't report payment information to the credit bureaus. So even if you manage to pay your electricity bill or heating bill on time every month, it may not do much for your credit score.

Of course, it still makes sense to pay those bills on time, even if they don't help your credit score improve. Being timely could help you avoid late fees. And if you're very late in paying utility bills, you could, in an extreme situation, risk having your service shut off. 

Bills that do count toward your credit score

While utility bills generally aren't factored into your credit score, installment loan payments and credit card payments are. So let's say you owe money on a mortgage loan. If you're on time every month, that could help you boost your credit score, or keep an already solid credit score in good standing. Similarly, timely auto loan and personal loan payments could help your credit score rise.

Paying your credit card bills on time could also help your score. And to be clear, you'll be counted as having made an on-time payment even if you only pay the minimum due each month, provided that payment is made by its deadline. 

Of course, it's really not a good idea to only make your minimum credit card payment month after month, because any balance you carry forward will accrue interest. And actually, too high a credit card balance relative to your total spending could drag your credit score downward. That factor doesn't carry quite as much weight when calculating your credit score as your payment history. But it's something you don't want to gloss over, either.