You may have ordered a copy of your credit report and discovered what appears to be a utility default listed against you. This discovery can happen either through a finance application or simply checking your credit file yourself. But what is a utility default and what do you do now that you have found one?
What is a utility default?
Default is the failure to repay a debt, including interest or principal, on a loan or security. A default can occur when a borrower is unable to make timely payments, misses payments, or avoids or stops making payments. Individuals, businesses, and even countries can default if they cannot keep up their debt obligations. Default risks are often calculated well in advance by creditors.
A utility default in Australia is a negative credit listing that occurs when you fail to pay a utility bill (such as electricity, gas, or water) for 60 days or more after the due date. These defaults can significantly impact your credit score and remain on your credit report for up to five to seven years. But how much of an impact do utility bills have on your credit score?
Defaults explained
A default can occur on secured debt, such as a mortgage loan secured by a house or a business loan secured by a company’s assets. If you fail to make timely mortgage payments, the loan could go into default. Similarly, if a business issues bonds—essentially borrowing from investors—and it’s unable to make coupon payments to its bondholders, the business is in default on its bonds.
Defaults can also occur on unsecured debt such as credit card debt. A default has adverse effects on the borrower’s credit and ability to borrow in the future.
A bad credit rating can follow you in other ways. Potential employers, especially for any employee needing a security clearance, often check the credit score of applicants and consider it a measure of your character. So do most cellphone and cable internet service providers, who may deny you the service contract you want. Utility companies may demand a security deposit from customers they don’t consider creditworthy. A prospective landlord might reject your apartment application, as well.
To be listed as a default, the following conditions must be met:
- The debt must be over $150
- It must be 60 days overdue
- The utility company must have sent you a written warning before reporting the default
How to remove a utility default from your credit report
Removing a utility default from your credit report is possible, but only under specific circumstances. These circumstances can include:
- Incorrect listing: If the default was listed incorrectly or the required steps weren’t followed when the company tried to chase up the debt, it can be removed.
- Dispute process: If you find inaccuracies, you can dispute the default with the credit reporting agency or the utility company directly.
- Professional assistance: While not always necessary, some people choose to work with credit repair agencies to help remove defaults. However, be cautious of high fees and no guaranteed results.
Important
If you choose to dispute the utility default listing yourself, either through the creditor or the credit reporting body, and you are unsuccessful due to not knowing the correct process or what aspects to dispute then you cannot use professional assistance like a credit repair company.
Unfortunately it is a one-shot situation. Failure to remove the listing correctly will cause it to remain on your credit report and history for up to 5-7 years. Impacting your ability to get finance or better rates.
That is why it is always important to check with a professional such as one of the team here at Clear Credit Solutions on whether it is something that can be removed first.
Remember
It’s important to note that paying the debt doesn’t automatically remove the default from your credit report. Prevention is key – if you’re struggling to pay utility bills, contact your provider to discuss payment plans or hardship programs before a default is listed.
