In India, having a good credit score while borrowing loans and credit cards at reasonable interest rates is essential. That is why it is important to maintain a clean repayment history.
That is why many also raise this question: Do credit scores get impacted because of delayed utility payments? This write-up is dedicated to answer this simple question only. Credit card holders, borrowers or loan applicants should all be clearly aware of the reality.
What is the impact of utility bills on credit scores?
Typically, paying utility bills like electricity bills, water bills, or gas bills late won’t hurt your credit score at all until and unless they are sent to a collection agency or reported to the credit reporting agencies. Even then, it continues to make sense to keep accounts current and bills cleared just to ensure overall financial well-being.
The idea here is that if ever there is an investigation or a hard inquiry on your credit profile, then it should be clearly reflected that you have always been consistent with repayment of all kinds of loans and credit demands on you.
When utility bills can harm your credit score
Bill charges are not typically reported to credit reports, except if they were sent to collections or there was a need for a deeper check on any individual’s credit profile.
Now for example: If you have a very high amount of debt pending to be repaid as a utility repayment and this is reported to your credit bureau, then it can surely have a negative entry in your credit report.
Here again your consistency in repayment of all kinds of debts is crucial. You need to ensure that you have a clean and transparent repayment history to back yourself and definitely not a pattern of later than usual payments.
What are the consequences of late payments?
Late payments of any type such as: credit cards, personal loans, other debt instruments etc., may cause serious damage to your credit score. Missing payment by itself would be enough to take away 50-100 points from your credit score in the event that the missed payment is reported by the lender. Continued late payments will gradually build up with lower credit scores over several years, hence making lending or issuing credit cards to become more difficult.
Further, issuing of debt also will become more expensive and difficult to obtain. The point to understand here is that yes, your utility bill payment makes no direct impact on your credit score but still, if you consistently make late payments and drag things on, then this is looked at in a bad light.
Eventually your future lenders will look at your consistency of repayment and your habit of not delaying payments for all kinds of services or loans availed by you.
Protecting your credit score
Now, in order to prevent the adverse impact of delayed payments on your credit score, pay all bills, including utility bills, on time. Automatic payments or reminders can prevent payment defaults. One must also check one’s credit report frequently for any irregularities or errors in reporting late payments.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult a financial adviser for personalised guidance.
