Have you ever wondered if your internet, phone, gas, and electricity bills reflect on your credit record? Household utility bills, such as water and gas, do not appear on your credit record as utility providers do not report payments to credit bureaus. But, there is a significant caveat. If you stop paying your utility bills and the utility provider sends your unpaid invoices to a collection agency, it might hurt your credit score.
How Do Late or Unpaid Utility Bills Affect My Credit Score?
As mentioned earlier, utility providers do not submit payment history or account records to any major credit bureau. Therefore, these payments normally do not negatively influence your credit scores. To be eligible to submit information to a credit agency, a utility provider must comply with the Fair Credit Reporting Act’s criteria. These include frequently revising payment information and reacting to disputes according to legally prescribed timelines.
However, suppose you miss several payments on your telecom and utility expenses, like electricity, cable, and phone. In that case, the provider may send your debt to a collection agency or charge up your account, presuming you will not pay. Often, this occurs if your bill is way past due and the utility providers are uncertain if they will ever retrieve the amount.
When a collection agency acquires a debt, it usually creates a collection account under the debtor’s name and reports it to one or all of the three main credit bureaus. When this occurs, the collections account is added to your credit report.
Once a charge-off or collection account is added to your credit file, it can have a long-term negative impact on your credit score, often referred to as derogatory marks. In turn, the account can stay on your credit report for at least seven years or even longer. Even though you settle your debt at the collection agency and close the account, there will still be a debt record.
Thus, not only do collection accounts have a negative influence on your credit ratings, but they also attract high additional fees that add to your overall debt. If a collection account has been started for a previous debt, it is advisable to address it as quickly as possible before the situation worsens.
What Should You Do If Your Utility Bill is in Collections?
It is critical to understand how to handle an account sent to collections. Debt collectors have a reputation for being a pain to deal with, as they regularly use unlawful or unethical measures and intimidation to get you to pay. Below are the steps to follow when handling an account in collections.
Verify the Debt
It is vital to note that you should never take accountability for debt when a debt collector contacts you. If you accept responsibility, you will have to pay it off, even if you find out later that the debt is not yours. Instead, insist that the collection agency show you confirmation of your debt and that the entity has the legal authority to collect the amount. However, if you are not ready to pick up the call from debt collectors, do not fear not speaking to them.
Settle Old Utility Bills
If the collection agency confirms your debt, you can proceed to engage with the debt collection agency. Remember that debt collectors acquire your debt for cents on the dollar. They do not anticipate being paid in full for the majority, if not all, of the loans they buy. Take advantage of this.
Make an effort to work out a payment plan. Make a plan whereby you submit monthly repayments for a set time until the debt is paid off if you cannot pay the whole amount in one go. You might also try to work out a lower payment plan than what you owe.
Get everything in writing once you make a deal with the collection agency. Since a verbal agreement is not valued in court, you can subsequently discover that you are in debt to the agency despite fulfilling your part of the deal. It is easier to confirm the agreement if it is written down.
Is it Possible to Remove your Utility Bill from Collections?
Generally, a collection account disappears from your credit file after seven years from when the utility bill became overdue. This refers to the first time you missed paying a bill. If you do not bring the account back into good standing within seven years, the account remains in your credit report.
In addition, while negotiating with the collection agency, you can also discuss a “pay-for-delete” arrangement. This is where you agree to pay what you owe if the collectors agree to remove your collection report from your credit file. Many agencies are often open to doing this, and it will significantly affect your credit score.
Utility bills can go to collection agencies, harming your credit score. Thus, it is vital to always stay on top of your bills at all times. But, if your account goes to collection, ensure that you know what to do. Contact us for more information on factors that influence credit scores and how to improve your credit score.