Utilities

While they may not be in your classic credit score, your relationships with utility companies can help you or hurt you. Telephone, energy, and cable companies that you've worked with keep data on your payment history. Establishing utility accounts and paying on time will open the door to increasingly better loans and better credit.

Be sure to get utility accounts in your name if you need to build credit. If one spouse of a married couple has a limited credit history, they should put utility accounts in that spouse's name. Likewise, if you live with roommates, see if you can get the utility accounts in your name to help with your credit. Of course, having the accounts in your name means you are on the hook for paying all of the bills.

A Different Kind of Score

Experian has a credit score developed specifically from your relationships with utility companies. Their Telecommunications, Energy, and Cable (TEC) Risk Model uses information from utility accounts to predict how likely you are to pay on time. While utility companies obviously have an interest in this score, people with little credit history are increasingly judged with the same information.

Innovations like the Telecommunications, Energy, and Cable (TEC) Risk Model allow vendors and lenders to score millions of additional consumers. Previously, these consumers were excluded from offers because nobody knew what to do with them. Imagine how many people use mobile phones and pay electricity bills, but have never used a credit card.

Likewise, the Fair Isaac Corporation uses has a credit score that incorporates information from utilities and other service providers. The FICO Expansion Score makes credit scores — and credit — available for consumers who previously could not be scored.

Keep Your Nose Clean

Utilities are also essential in keeping your credit squeaky clean. If you've failed to pay bills you owe, your debt could be sent to a collection company. Collection items are especially damaging to your credit history, and an unpaid utility bill can leave a black mark on your credit for seven years. As always, communicating with your utility providers before a problem gets out of hand is the best route. They would rather work with you than send your account to collections.

Another reason to stay current on utility bills is that you may have an opportunity to use your payment history as negotiating clout. While many lending decisions are automated, some lenders still make decisions the old-fashioned way. If you can show them a steady history of on-time utility payments, an uncertain lender may give you a shot at a better loan.

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