Utility credit is an integral part of any consumer’s credit history. The manner in which a consumer pays his monthly utility bills can have a positive or negative impact on his score. This type of credit is used to obtain many of the creature comforts that so many people take for granted including heating capacity, cooling capacity, cooking facilities, lighting fixtures, and communication needs.

The existence of utility credit is often overlooked by consumers since it is taken for granted by those who obtain it easily. In fact, once a consumer receives an extension of credit by a utility company, he might never think of it again, especially not in the context of some type of lending practice except when it comes time to pay the bill.

The manner in which a consumer obtains utility credit appears quite a bit different on the surface than obtaining a credit card account. After all, when obtaining a credit card account, the consumer fills out a lengthy application that includes the need to input information form many different areas of an individual’s life. Then, there is a waiting period that is longer for some borrowers than others. Next, if the account is approved, the spending can begin. Finally, the monthly bill comes due. Typically, the payment is due in full.

Despite its quiet presence in the background of most conversations related to credit and the lending of money, utility credit is an essential aspect of anyone’s life. Without it, they would not be able to access those services that allow consumers to use them prior to actually paying for their use of the utility service. Utility companies include those offering the following services: gas, water, electric, and telephone.

With the responsible use of his utility credit, a consumer influences his credit score in a positive manner. If he misuses the account by failing to pay his debts on time or in full, then he is going to affect his credit score in a negative manner. This information can be used to influence decisions to extend credit through a loan, mortgage, or credit card by another company. It can also affect whether or not an individual gets a particular job.

Credit History Related to Utility Use

A consumer’s utility credit appears in his credit history along with all of other pertinent information. The payment history of utility bills can be used to determine the credit worthiness of the individual applying for gas, water, oil, or electric services. If the company determines that the potential customer presents a bad risk for the company, it will require a deposit or letter of guarantee. While these conditions might be less than favorable, the customer will be able to receive the service that he requests.

Additionally, the utility company can also consider the utility credit history of the spouse or significant partner of the individual who is requesting service. If this individual has a bad utility credit history, then the deposit or letter of guarantee might also be requested by the company offering gas, electric, water, or oil. In some states, if the consumer can prove that he did not live with the individual during the time that the bad credit was established, the negative history will be discounted and no negative consequences will ensue.

Utility Deposits and Letters of Guarantee

In some cases, the consumer might be required by the utility company to place a deposit on his account in order to obtain service. In other cases, a simple letter of guarantee will secure the service for the consumer. Such a letter is produced by another individual who states that he will make good on the debt if the applicant does not. Typically, these items are only requested of individuals who have bad credit histories.

The guidelines of the Equal Credit Opportunity Act or ECOA as it is also known does not allow utility companies to discriminate against its applicants. This means that the company cannot refuse service based upon the following factors: age, sex, religion, race, marital status, or national origin. Additionally, potential customers who are on public assistance cannot be turned away without due cause.

The ECOA protects consumers. If the utility company deems it necessary, the company can request that the potential customer submit a letter of guarantee or a deposit in a specific amount. This practice might be restricted to potential customers who have a bad credit history or it might pertain to all new customers depending on the specific utility company involved.

Denied Utility Service Due to Bad Credit

In the event that the consumer presents with extremely bad credit, the utility company might make the decision to deny utility service. When this type of situation arises, the consumer has the right to request a written statement outlining the reasons that precluded him from obtaining the service. The utility company must provide the written statement in accordance with the law if it is requested.

Additionally, the utility company must inform the customer in writing of this right at the time that he is denied service. This information must be sent within thirty days of the denial of service.

Moreover, if the potential customer receives an offer of service with restricted terms, he is also entitled to a list of the reasons that led to the restricted offer. Plus, he must receive the same notice from the utility company informing him of this right within thirty days of the offer of restricted service.

If the consumer decides to exercise his right to receive this information, he must submit a written request to the company within sixty days of receiving the notice. If the request is sent after sixty days have passed, the company is not required to send the list. However, some utility companies might still send the information.

The primary difference existing between utility credit and all other forms of credit is the fact that the government includes specific guidelines in regard to the company’s right to cancel service. In particular, utility companies have restrictions in place as to their right to deny service during the winter if the customer already has service.