Why Do Utility Companies Check Your Credit?

You finally signed the lease, paid the deposit, and handed over the move-in fees. Now you need to turn the electricity or gas on. You call the utility company; they ask for your social security number to run a credit check. Why do they care about your credit score for a light bill?

Because utilities operate on a "use now, pay later" setup. You consume electricity or gas all month and the company bills you based on your usage. Before they extend that short-term line of credit, they check your payment history to see how risky it is to trust you.

What If Your Credit Isn't Strong?

Bad or limited credit doesn't necessarily mean you can't establish utility service. It means you have to pay more upfront.

For example, Georgia Power can charge a deposit of up to twice the home's average monthly bill.

• Average Monthly Electric Bill: $180
• Potential Upfront Deposit ($180 × 2): $360

That's $360 you must hand over before you flip on a light switch. And, this comes after paying the first month's rent, movers, security deposits, etc.

What About Natural Gas?

In Georgia, natural gas is deregulated; meaning you choose a private marketer (like Gas South, Georgia Natural Gas, or SCANA) to supply and bill your gas service.

Like power companies, gas marketers check credit and can require an upfront deposit. However, state regulations generally cap standard residential deposits at $150, helping limit the funds required at setup.

Does Checking My Credit Lower My Score?

The Federal Trade Commission (FTC) says utility companies may check your credit when you apply for service. The type of credit inquiry used can vary, so ask the provider whether its credit check will affect your credit score.

You can also ask whether there are alternatives to a credit check or deposit.

Does Paying Utilities Build Credit?

Usually, paying your electricity or gas bill every month doesn't automatically appear on your traditional credit reports. There are services that allow certain utility payments to be considered in your credit history, but that's different from your utility provider automatically reporting your monthly payments.

On the other hand, if an unpaid utility bill is sent to a collection agency, a company hired to collect overdue debt, that collection could appear on your credit report and potentially affect your credit.

One More Moving Expense to Plan For

Credit isn't only about borrowing money.

It can affect how much cash you need to get established in a home. When you're preparing to move, budget for more than rent and a security deposit. Ask your utility providers about connection fees, deposits, and credit requirements before move-in day.

That gives you time to prepare instead of finding out that turning on the lights requires another few hundred dollars you weren't expecting.

Sources: Federal Trade Commission, Georgia Power, Georgia Public Service Commission