Getting a bill in the mail is not one of the most exciting times in life. Responsible, timely people, though, make sure that their utility and phone bills get paid on time. That’s why I get asked this question very often: How come I don’t have credit? I pay my rent and all my utility bills on time!

Here’s your answer: Utility and phone bills do not help build credit!

So now, you got even less excited about paying those bills! Huh! But yes you read right. Unfortunately, paying utility bills on time will not in any way help you build credit.  Could be you have never missed a single payment on any utility bill for 20 plus years, and you still will not have a credit score. Unfortunately, utility and phone companies do not report the on-time payments to the credit bureaus. Therefore, it’s impossible for the on-time payments to help you build credit.  In order to build credit, you will need to either open a credit card or take out any other loan that reports the on-time payments to the credit bureaus.

Why Not?

The credit bureaus claim that the reason why on-time utility bill payments are not reported is that they are not loans. But that’s 100 percent not true. What’s the difference if a bank lends you money or if a utility company lends you water? They both are lending you goods on the condition of repayment.

The real reason why utility bills are not reported is very simple. The credit bureaus charge a fee for the companies who want to report to them. Utility companies feel that they do not have any benefit from reporting their bills to the credit bureaus. Therefore, why pay? Different, are credit card issuers and banks which base their lending decisions on credit scores. So if one bank will not pay to report their trade lines, then the next bank will stop as well. Plus, consumers will rather do business with banks that do report as they want their credit cards and loan products to help them build credit. Therefore, it became common practice for banks to pay to report their trade lines to the credit bureaus.

Will Missing Payments On a Utility Bill Effect My Credit?

There is a good side to the package as well. Since utility bills are not reported to the credit bureaus, missing a payment on a utility bill will not affect your credit either. But please note: If you do not pay your utility bill for a few months, the company will eventually sell the debt to a collection company. The collection company will most likely report the collection to the credit bureaus, which will, of course, affect your credit score.

(Exception to the rule: There are very few phone companies which will report even a 30-day late payment to the credit bureaus, but most don’t.)

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Have fun building great credit!