In this article:
- Inquiries From Utility Companies on Your Credit Report
- The Difference Between Hard Inquiries and Soft Inquiries
- Will Lenders Deny My Credit Application Because of Inquiries?
- What to Do About Inquiries You Don’t Recognize
- Can Utility Bills Impact Credit Scores?
- Ensure That Utilities Help—not Hurt—Your Credit
When you submit an application to open a new utility account, the company may run a credit inquiry to determine the likelihood that you'll pay your monthly bill on time. That inquiry can have an impact on your credit report and score, but the impact may be small and can diminish over time.
Today, utility accounts can actually be used to positively affect your credit report. Read on to find out how.
Inquiries From Utility Companies on Your Credit Report
While your payment history with utility companies hasn't historically been included in your credit report, the inquiries they run when you first apply for an account do. The inquiry signifies that you may be taking on a new monthly financial obligation.
If you apply for a credit account in the near future, the lender may consider this information to determine your ability to take on new debt.
A utility inquiry is considered a hard inquiry, so it can also have a negative impact on your credit score. That said, the effect is usually minimal and will decrease over time.
The Difference Between Hard Inquiries and Soft Inquiries
There are two types of credit inquiries: hard and soft.
- Hard inquiries typically occur when you initiate a credit transaction, such as applying for a loan, credit card or utility account. The inquiry will show up on your credit report in a section titled "Requests shared with others."
Because hard inquiries show your attempts to take on new debt or open a utility account, they're also included in your credit score calculation. That said, one additional hard inquiry will typically knock less than five points off a person's FICO® Score*. Where it can have a greater impact is if you have too many inquiries in a short period. Why? Because it can be a sign of financial distress.
- Soft inquiries, on the other hand, don't impact your credit. These typically occur when a prospective lender sends a preapproval offer, or an existing lender runs a credit inquiry during a routine account review.
Soft inquiries on your credit report are only visible to you, except: (1) insurance companies may be able to see other insurance company inquiries; and (2) inquiries by debt settlement companies you have authorized to access your report may be shared with your current creditors. These inquiries have no effect on your credit score as they are never considered as a factor in credit scoring models. Soft inquiries are not disputable but are available for reference.
Soft inquiries will show up on your report in a section called "Requests for your credit history shared only with you." Other lenders can't see them, and they won't affect your credit score at all.
Will Lenders Deny My Credit Application Because of Inquiries?
In most cases, hard credit inquiries alone won't cause a lender to deny an application for credit. You'll usually get four or five different reasons for a denial from the lender. And while one of them will almost always be recent inquiries, that's because the law requires that inquiries be included if they have any impact on your credit score.
That said, hard inquiries aren't typically considered serious unless there are other significant negative factors make you a credit risk overall.
What to Do About Inquiries You Don't Recognize
If you don't recognize an inquiry on your credit report, don't panic. Many creditors and utility companies use abbreviations or a parent company name when reporting credit activity. Do a quick online search to try to match the name to a company you did business with.
Another reason may be that you applied for a type of loan where several lenders were competing for business. This often happens with auto loans and mortgages where the dealership or broker sends your application to multiple lenders to shop around for the best rate.
While "rate shopping" inquiries are consolidated into one for credit scoring purposes, you'll still see each one on your credit report.
If neither of these scenarios is the case, it could be a sign that you're a victim of fraud. If you believe someone has stolen your identity, contact the credit reporting agencies, including Experian, Equifax, and TransUnion, to dispute the information. Also, consider adding a fraud alert or freeze to your credit file.
Can Utility Bills Impact Credit Scores?
Utility bill payments typically don't affect your credit score because most utility companies don't report on-time payments to the credit bureaus. The exception is when you're severely delinquent on your payment, and the utility company sends your bill to collections.
At this point, the collection agency will typically report the past-due debt to the credit reporting agencies, which can significantly damage your credit score. The same can happen if the utility company charges off your account, assuming you're not going to pay.
Simply give Experian access to your bank account data, verify monthly utility payments, and confirm that you want them included on your credit report. If the new information can increase your credit score, the boost will happen immediately.
Experian Boost doesn't include late utility payments in its calculations, so you don't have to worry about those having the opposite effect.
Ensure That Utilities Help—not Hurt—Your Credit
Utility inquiries can have an impact on your credit report, so it's important to avoid moving from company to company in a short period. Also, consider opting into Experian Boost to see if it can increase your credit score.
If you're late on a utility payment or your account has already been sent to collections, try to get caught up on payments or pay off the collections account as quickly as possible. Then work to maintain a positive payment history going forward.
To get a better understanding of where your credit stands, order a free credit report. While a delinquent account can remain on your credit report for seven years, new positive credit activity can reduce its impact over time.
Want to instantly increase your credit score? Experian Boost™ helps by giving you credit for the utility and mobile phone bills you're already paying. Until now, those payments did not positively impact your score.
This service is completely free and can boost your credit score fast by using your own positive payment history. It can also help those with poor or limited credit situations. Other services such as credit repair may cost you up to thousands and only help remove inaccuracies from your credit report.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on March 11, 2019, and has been updated.
*Credit score calculated based on FICO® Score 8 model. Your lender or insurer may use a different FICO® Score than FICO® Score 8, or another type of credit score altogether. Learn more.