The 1 Thing That Could Instantly Make Your Credit Score Better

Just about everybody has to pay their electric bill, but that payment you make every month to keep the lights on rarely, if ever, makes it into your credit report. And that’s too bad, because one of the big three credit bureaus says it could really shed some “light” on your score if it was included.

Credit bureau Experian conducted a study and finds that the number of Americans with subprime credit scores below 600 would fall by nearly 50% if on-time utility payments were part of their credit profiles. The number of people in the nonprime or “fair” credit bracket of 601 to 660 would shoot up by 54% and the number of people with scores above that would go up by 15%.

There has been a lot of interest in this so-called alternative credit reporting, using data like electric bills, rental payments and even cell phone bills. Advocates of including this kind of information, like Experian, say it would help “credit invisible” people who have little or no traditional credit history establish one. If both rent and utilities were part of credit scores, Experian says as many as 54 million people who are essentially invisible today would be able to participate in mainstream finance.

Right now, a pile of red tape keeps this information from appearing on most people’s credit reports. There’s debate about whether or not the government should regulate inclusion of this kind of data, and advocacy groups have expressed concern that utility payment information could be misused once in the hands of credit organizations and could lead to people’s scores falling if late or missed payments are included. Currently, most of the times a utility bill does make it into a person’s credit file is because they didn’t pay and the bill went into collections. “Reporting such negative data will most certainly push those same families struggling to recover from foreclosure and bankruptcy out of their rental homes,” one warns.

But Experian says if utility payments were included in credit scores, more than three-quarters of people who already had a credit score would see their score rise. The majority of scores would go up by at least 11 points, the bureau says — that’s a big enough spread that could mean the difference between getting the best rate on something like a mortgage or car loan and having to dig deeper into your pockets every month. Experian found that only 3% of people would see their credit scores fall.