As winter approaches, credit reference agencies are reporting a concerning surge in the number of defaults being registered by UK energy providers. Missed gas and electricity payments are now one of the leading causes of credit score damage among UK consumers.
Utilities are credit accounts
Many consumers mistakenly believe that their credit score is only affected by banks, credit cards, and loans. In reality, your energy provider, water company, and broadband supplier all report your payment history to the credit agencies.
If you pay by monthly Direct Debit, you have a credit agreement. If you miss a payment, a late marker is added to your file. If you miss several, the energy company will register a default, which stays on your record for six years and destroys your ability to access cheap credit.
What to do if you cannot pay
If you are struggling with rising energy costs, the worst thing you can do is cancel your Direct Debit. Instead, contact your supplier immediately. Under Ofgem rules, energy companies must offer you a realistic payment plan based on what you can afford.
Entering into an agreed payment plan is far better for your credit file than allowing the account to fall into default.