An emergency, such as an unexpected car repair, might leave you without enough money to pay your electric bill. Perhaps your water bill was lost in the mail, or you simply forgot to send in a utility payment on time. Provided you catch up on payments as soon as possible, your overdue utility payment won't damage your credit rating.
Utilities and Credit
Major creditors, such as mortgage lenders and credit card providers, hold reporting contracts with the credit bureaus. These reporting contracts require them to update your credit report regularly to reflect your payment history and current debt level. Your utility bills, however, are open accounts. You typically do not carry utility debt; instead, you pay off your utility debt in full each month. Because you must pay off the debt you incur to continue the service, your utility providers have little reason to report your account to the credit bureaus. This lack of reporting benefits you, because, if your payment did not arrive in time, you won't suffer a black mark on your credit report.
Unpaid Utilities
Just because overdue utilities won't hurt your credit rating initially, that does not mean that unpaid utilities cannot show up on your credit report. When you stop making payments to your utility provider altogether, the provider eliminates your access to the utility in question and adds fees to the amount you already owe. The policies of utility providers differ, but if you do not make arrangements to pay off your overdue utility bills, the utility company usually transfers the debt to a collection agency for recovery. Unlike utility companies, collection agencies do report to the credit bureaus. Thus, should your utility bill end up in collections, it can appear on your credit report and hurt your score.
New Services
When you sign up for utilities with a new provider, the provider conducts a credit check. The credit check alerts the new provider of your reliability level and determines how much of a deposit -- if any -- you must pay before receiving new service. Utility companies sometimes contact your previous utility providers to find out whether you paid in a timely manner for the services you received. Even if you have acceptable credit, evidence of your refusal or inability to pay off a previous utility account could result in denial of services or a higher deposit.
Reporting Period
If your utility payment is overdue, making arrangements to pay it off as soon as possible is in your best interest. If you do not pay your debt and the account ends up on your credit report as a collection account, the Fair Credit Reporting Act mandates that the collection record remain a part of your credit history for seven years. If the credit bureaus do not automatically remove the account after seven years, you can file a dispute with each bureau, claiming the entry is obsolete.
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