All About Utility Credit

Utility credit is most likely the least thought about type of credit extended to consumers. Once a consumer has utility credit, the consumer has no need to think about it anymore. In fact, it simply becomes an automatic monthly bill. The process is the same as with other credit sources- sign up, get approved, buy now, and pay later.

One of the most important types of credit, utility credit is necessary to acquire or open an account with a utility company, including electric, gas, water, and telephone. Extremely necessary, utility credit provides the creature comforts of your home- heating and cooling, lighting, cooking, and communication of all kinds.



The consumer develops a utility credit history through his or her payments that the utility company keeps track of for future reference. This information becomes part of the consumer's entire credit history that can be accessed anytime the consumer applies for credit, a mortgage, or a job.

Deposits

Frequently, a utility company may require the consumer to provide a deposit or a letter of guarantee to acquire service. The letter of guarantee is from someone who agrees to pay the bill if the consumer cannot.

Under the ECOA, or Equal Credit Opportunity Act, the company cannot discriminate against its customers on the basis of marital status, sex, race, religion, age, or national origin. Additionally, they cannot discriminate against anyone who is receiving public assistance. However, utility companies can require deposits or letters of guarantees from individuals with bad credit histories or from new customers across the board.

Utility Credit History

Similar to other types of credit, utility credit appears in the consumer's credit history. If the utility company determines that the individual applying for utility credit has a bad utility credit history, then they can deny credit or require a deposit or letter of guarantee. This is known as offering credit with unfavorable terms.

If the consumer is married, then the credit history of the spouse will be considered when determining the availability of utility credit to the consumer who has applied. In most cases, this is not a problem, unless the spouse has a bad credit history. Then, this will have a negative impact on the application.

It will be up to the consumer to provide evidence that he or she did not live with the spouse during the time that they developed the bad credit history. The utility company will be required to disregard the spouse's bad credit if the consumer can prove that he or she did not live with the spouse at the time the bad credit was developed, did not have any knowledge of the bills when they were due, or paid the bills once he or she had knowledge of them. Unfortunately, in states that have a community property law, the rules are a bit different, and the utility company may continue to consider the spouse's credit history even if you did not live together at the time.

Denied Credit or Less Than Favorable Credit

If a consumer is denied utility credit, or any other type of credit, the consumer has the right to request a written statement listing the reasons why that credit was denied. Likewise, if the company offers the consumer less than favorable terms of credit and the consumer decides to turn this down, the consumer is also entitled to a written statement clarifying the company's reasons behind the offer.

The company must provide either a written statement listing the reason or reasons why the action was taken or a written statement informing the consumer of their right to receive the information within thirty days. The consumer needs to make this request within sixty days of receiving notice that their credit has been denied or restricted with unfavorable terms.

More Information

The biggest difference between utility credit and other types of credit is the government's involvement. While the government does not step in and restrict credit card companies from canceling or denying credit, it will step in and restrict utility companies from completely shutting off services in the dead of winter.

The Federal Trade Commission, FTC, is the government agency that oversees the prevention of discriminatory, fraudulent, or deceptive business practices. Several laws are in place that aid the consumer in filing a complaint and obtaining restitution or fairness. To acquire free information on dealing with complaints contact the FTC.

The FTC can be contacted toll-free at 1-877-FTC-HELP or online at www.ftc.com. Furthermore, the FTC will enter the complaint into a comprehensive online database, Consumer Sentinel. Many civil and criminal law enforcement agencies have access to this information. Consumers can best protect themselves by learning the methods to detect unfair credit practices and fraud, the steps to filing complaints, and their rights as consumers.