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Topics addressed on November 28, 2007:
Reporting utility bill payments will be beneficial to consumers
I got my credit report recently and was shocked to find that all of my monthly obligations were not listed, making my score very low. I pay my utility bills, Internet service provider, merchandise shipping contracts, telephone, cable television, and rent on time every month, and I have an open Paypal/Ebay account. If these were listed I am sure that my report would look more favorable. How can I get these items onto my reports so that a future lenders looking at my credit profile for a home loan will know that I am an honest hard working person, paying her obligations as agreed?
I agree that most of the things you mention would be very helpful if they were reported, particularly for people who are just beginning to establish a credit history and are trying to build their creditworthiness to qualify for home loans and other types of credit. Unfortunately, the bill payments you mention are not regularly reported to Experian or the other national credit reporting companies.
However, that is beginning to change, albeit slowly. There are a number of legal and technical hurdles that must be cleared in many states, and there has been some inexplicably negative media coverage that may be causing some reluctance to report the information.
For example, I recently read an article about a Minnesota natural gas utility that is now reporting its customers’ payment histories.
Ironically, one “consumer advocate” attacked the utility company’s decision, claiming it would devastate some consumers’ credit scores and so should not be allowed. I’m baffled by that assertion.
Today, many utility companies report bad debts to collection agencies, which then report to the national credit reporting companies. The failure to pay is going to appear on the person’s credit history whether or not the positive information is reported, and a collection account hurts credit scores more than almost anything short of bankruptcy.
What is overlooked, or ignored by this particular “consumer advocate” is that if the utility company were reporting information directly, both positive and negative information would be reported. As a result, a single late payment would have far less impact than a collection account, and would be balanced by all of the positive payment history that otherwise would not be included in the credit report.
As you point out, reporting positive payment histories to the national credit reporting companies would be a tremendous benefit to people who are trying to build a new credit history or are trying to rebuild their poor credit history.
For people with strong, established credit histories, the addition of this kind of information is not going to hurt them, and may be beneficial.
Only consumers who already have credit problems and who do not pay their utility bills on time could be seriously affected by having negative bill payment information included in their credit reports.
A person who is declined for a new credit account because of a late utility bill payment almost certainly is already having trouble managing their debts. If so, that late payment causing their credit scores to dip could be a good thing because it is preventing them from digging themselves deeper into debt.
If a person is unable to pay their utility bill, they probably shouldn’t be opening new credit card accounts or taking on other new debts that they can’t afford. If you can’t pay your heating bill in the winter in Minnesota, you definitely don’t need to buy non-essentials with a credit card.
“No” is sometimes the right answer, even though none of us ever want to hear it.
The tremendously positive implications of reporting these kinds of “credit-like” relationships are sometimes overlooked or simply ignored.
Thanks for asking.
- The "Ask Experian" team