Here's What Happens When You Stop Paying Your Utility Bills

If you're experiencing financial troubles and are lacking cash in your checking account, you may have no other option but to pay some bills late or skip payments altogether. So what happens if you miss your utility payments because you can't afford the bill? Keep reading to learn what happens when you don't make the payment, as well as some resources if you're struggling with your bills.

What happens when you don't pay utility bills?

First off, let's define what counts as a utility bill. Your utility bills are the payments you make for essential services like electricity, water, and gas. 

If you miss your utility payments, you'll typically be hit with a late fee that will appear on your next statement. However, if you don't make payments over an extended period, you risk disconnection and having your account sent to collections. Utility companies could also require you to pay a higher security deposit in the future.

The rules for disconnecting utilities vary widely by state and company. Some states have laws that prohibit utility companies from disconnecting services in some situations, like during certain times of year, when the temperature hits certain thresholds, or if the household has children, elderly residents, or a member with a medical condition.

In Maryland, for example, an electric company can't shut off service if the 72-hour forecast predicts temperatures higher than 95 degrees or lower than 32 degrees. If someone in the household has a serious medical condition, disconnection is delayed for 30 days. In Florida, however, there are no state laws that prohibit disconnection regardless of temperatures or whether a household member has a medical condition.

If your service is shut off, you'll typically have to pay the outstanding balance, plus a reconnection fee. 

Will unpaid utility bills hurt my credit score?

Utility companies typically don't report your payments to the three major credit bureaus, so being late on a payment shouldn't hurt your score. However, if you don't pay your bill for an extended period, it's likely that your service will be disconnected and the account will go to collections. That can cause your score to tank because payment history matters more than any other credit factor, accounting for 35% of your FICO® Score.

And while the three major bureaus don't keep track of utility payments, at least one specialty consumer reporting agency called the National Cable, Telecommunications and Utilities Exchange (NCTUE) compiles information about payment history from utility, cable, and TV companies. This reporting could make it harder to get services in the future or result in a higher security deposit.

What to do if you can't afford your utility bills

If you can't make your utility payments, it's ideal to contact your service provider before you miss a payment. It may be willing to put you on a payment plan or offer other emergency relief options. Other options that may be available:

• Apply for LIHEAP or LIHWAP: The Low Income Home Energy Assistance Program (LIHEAP) provides assistance with energy costs to families with low incomes. And the Low Income Household Water Assistance Program (LIHWAP) can help with water and wastewater costs. Eligibility requirements will vary by state. If you're approved for a grant, the money goes directly to the utility service provider.
• Call 211: If you're struggling to make utility payments, call the 211 hotline. You simply dial 211 in the same way you'd dial 911. The professionals who work the hotline may be able to connect you with local resources that can help.
• Look into payday loan alternatives. If you're a member of a credit union, you may be able to receive a payday alternative loan (PAL). These are small-value loans that typically range from $200 and $1,000 that you repay over one to six months. The interest is capped at 28%. That makes them significantly cheaper than payday loans, which often have interest rates in the 300% to 400% range.

Though it won't help you with past-due bills, the utility company may have programs that allow you to split future bills into 12 equal payments based on your past usage. That can help make bills more predictable, particularly if you live in a region that's prone to extreme weather.

Finally, if you're struggling with debt in general, consider credit counseling through a nonprofit organization like the National Foundation for Credit Counseling (NFCC). You can find assistance with negotiating with creditors and managing debt. You might also want to discuss whether declaring bankruptcy makes sense.

The bottom line: There's no shame in needing help. But the sooner you take action, the more options you'll have available.