Fall days are turning nippy, and with winter right around the corner, many consumers may be worried about the rising cost of heat this winter. Here’s another thing for them to worry about: high utility bills could hurt their credit scores, if a bill sponsored by House Representative Jim Renacci gets through Congress.
The bill, H.R. 6363, called “The Credit Access and Inclusion Act” would amend the Fair Credit Reporting Act, allowing public utility companies to report positive consumer information to major credit bureaus, according to its supporters. However, opponents of the bill say the language is murky enough that negative information could also be subject to reporting, and that it potentially puts consumers on a slippery slope that could land them in a heap of trouble with credit bureaus if they fall behind on their utility payments.
A Helping Hand for People Who Lack Credit
The bill’s sponsors say that it gives consumers with limited credit histories a way to boost their credit scores just by paying their heat, electric, and phone bills on time. “Those who have yet to gain credit should be able to use all of the tools available to them to establish their credit worthiness,” said Representative Jim Renacci, a first-term Congressman from Ohio, who co-sponsored the bill along with Representative Keith Ellison of Minnesota and three other House Representatives.
According to Ellison, “tens of millions of Americans cannot rebuild their damaged credit history or build a more accurate score without taking on additional debt. Our bill offers a no cost strategy to build household wealth and generate economic growth.”
Meant to Help, Could Harm Instead
However, if negative information is reported as well – a possibility, according to the National Consumer Law Center, a consumer advocacy group represented by John Howat – then consumers who struggle to make utility payments could be hurt by the very law meant to help them. He says that consumers should be able to opt-in if they want their utility payments reported to credit bureaus, but that they should not automatically be subject to reporting.
“Particularly in households where there isn’t enough income, for a whole range of reasons, to pay for necessities, they may be a little bit late but they do ultimately catch up,” said Howat.
A Better Option for Building Credit
In fact, consumers with no credit or bad credit don’t have to go into additional debt to rebuild their score, as Representative Ellison claims. Almost anyone can be approved for a secured credit card that will report payments to credit bureaus, and if cardholders make small purchases and pay them off on time and in full each month, their credit scores will reflect that. Secured credit cards often have high fees and almost always have high APRs, but when chosen carefully and used responsibly, they are a good option for people who need to establish or rebuild credit.
“Paying utility bills on time is ideal, obviously, but it’s not always possible in today’s economy. Many families struggle to make ends meet and if they want to improve their credit score, there are secured credit cards and credit cards designed for people with no credit history that can help them meet their financial goals and raise their credit scores,” says Michael Germanovsky, editor-in-chief of Credit-Land.com.