Credit Score Basics > Does failing to make utility payments affect credit score?

Does failing to make utility payments affect credit score?

Wollit Team2 minute read · Updated 29th June 2024

Yes, failing to make utility payments can negatively affect your credit score in the UK. This is because utility services are essentially credit agreements, which means that they are recorded in your credit file.

However, lowering your credit score isn’t the only consequence of missing utility payments.

What can happen if I miss payments for utilities?

The first thing that happens if you miss a payment for one of your utilities is that your credit score will take a hit.

Utility companies like gas, electricity, water, broadband, and phone providers can report missed or late payments to the three major credit reference agencies (CRAs) in the UK – Experian, Equifax, and TransUnion. These negative payment records can then lower your credit scores with each agency.

This happens because when you sign up for utility services, you essentially enter into a credit agreement where the provider supplies the service upfront, and you pay for it later through your bills. If you fail to pay on time, it shows poor credit management, which lenders and credit reference agencies view as a red flag.

The second thing that happens is that the utility provider might close your account and mark it as a default. This can take as much as 300-350 points from your credit score (on the Experian scale).

However, before this happens, utility companies will usually first try to recover the unpaid debt through debt collection agencies. While the debt itself may not appear on your credit reports initially, once it enters collections, the collection accounts and missed payments can be reported to the CRAs, further lowering your credit score.

If this is not enough, the provider may also take legal action by getting a County Court Judgment (CCJ) against you. Defaults and CCJs are severe “adverse events” that can really hurt your credit score. They will also stay on your credit report for six years, making it extremely hard to get new credit or to open new accounts during that time.

One final thing that can happen: if you share a utility account with someone else, like a partner or roommate, you become financially associated with them. If they miss on paying their share of the bill, this can end up hurting your own credit reports and scores, even if you've been making your share of payments on time.

How can I protect my credit score from the impact of missed utility payments?

To avoid credit score damage from utility bills:

Set up direct debit or recurring payments to make sure all bills get paid on time.
Talk to your providers immediately if you're struggling to make payments, as they may be able to give you payment plans or even a temporary break from payments.
Finally, consider a credit-building app like Wollit that can help maintain or rebuild your credit history through regular payments.

Wollit is an app that works by reporting a fixed-fee monthly subscription as a loan repayment to all credit reference agencies. This helps you build a history of timely debt repayments, which is the main factor that matters for your credit score.

On top of this, Wollit can also report your monthly rent payment to Experian. This can add another line in your credit report which shows lenders that you do pay your bills on time, helping you reduce the impact of a single missed payment in your overall credit file.