Relation Between Your Utility Bills And Your Credit Score

Many people feel that credit scores are affected only by your borrowing habits

. Some are under the impression the number of loans you have impact your overall score and others feel only your repayment habits are what decide whether you have a positive or negative credit history. While it is true that borrowing is the primary factor in calculating credit scores, it is certainly not the only factor. As a matter of fact, it is possible that you end up with a poor credit score purely because of your utility bills. To understand completely the relation between your utility bills and your credit score, let us look at the following three scenarios:

Scenario 1: This is where you always pay all your utility bills on time, whatever they may be. This is of course the best case scenario and your credit score remains unchanged. While paying utility bills on time every time ensures your score does not go down, the bad news is that it does not ensure your score going up either. This means that paying utility bills on time will never positively affect your score but it has the ability to make a negative impact.

Scenario 2: This is where you are late on your utility bills once in a while. In this scenario, sometimes when you face a cash crunch or have met with an unforeseen situation, you are unable to pay the bill by the due date and you get delayed for a month. Now in this scenario, you are late once in a while but never too late i.e. never late by more than 2 months. Here in most cases, it wont affect your credit score unless and until you are defaulting on a credit card bill. However, for bills such as electricity or cable, this does not affect your score. Of course the important thing to note in this scenario is that you are late only once in a while and not always.

Scenario 3: This is where you are late regularly on your bills or you are late by almost 3 months or more on any of your bills. Now this is certainly the worst case scenario as these kinds of customers are usually reported to various collection agencies around the country. Moment your name has been reported, you can be sure that your credit score has taken a dive.

It is important you never let your bill payments get to this stage. It is ok to be late once in a while but do not make it a habit. If it is a credit card bill, then try not to be late ever. If required, apply for a payday loan to get quick cash and pay any pending bills.

by: Martin Lander

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