How Much Does a Utility Collection Bill Affect My Credit?

Utility bills become collection accounts after the customer stops paying or fails to pay a final balance after ending service. Cable companies, Internet providers and energy companies usually assign or sell delinquent utility bills to debt collectors. The debt collector places the account on credit reports as the collections process begins. Utility collection accounts hurt credit scores, but no one can state specifically how much it impacts a score, because everyone's credit is different.

Credit Scores

FICO scores, which are the credit scores used by most lenders, range from 350 to 850, with scores above 720 indicating excellent credit, according to the Privacy Rights Clearinghouse. People with excellent credit have the most to lose when a utility collection is added to their report. Someone at the high end of the scale credit could experience a significant drop in score, while someone with a score of around 500 might not lose any points because his overall score is already bad. The Privacy Rights Clearinghouse reports a score of 620 is usually considered the minimum score needed for good credit.

New Credit

Utility collection bills can hurt credit even if the credit score does not drop. Cell phone companies and other utilities review credit reports to determine how a potential customer has paid similar accounts. Cell phones are sometimes considered utilities, and skipping a $200 cell phone bill can make opening a new account with another carrier difficult. The carrier may decline to approve the application or may require a sizable cash deposit. The carrier may fear that the potential customer is developing a track record for failing to pay utility bills.

Pay-for-Delete

Some utility collection bills are for fairly insignificant sums, perhaps $200. People restoring their credit should pay the bills and negotiate a pay-for-delete arrangement while doing so. Pay-for-delete allows removal of the account from credit reports when you make full payment. Some debt collectors engage in pay-for-delete, but they are not required to do so, and some will not. However, it often is worth attempting to get a creditor to agree to a pay-for-delete arrangement, because it clears negative information from credit reports and makes the customer more appealing to utility companies.

Considerations

Missing regular payments to utility companies does not affect credit, according to Experian, one of the major credit reporting bureaus. The agency reports that utility companies usually do not report monthly payment histories to credit bureaus. Credit problems with utility payments occur only after the account is assigned to a debt collector for nonpayment. In that event, the account is reported to the credit bureau.