YOU might be unaware that your credit scores can take a major hit if you’re looking to switch energy suppliers or miss payments.
Most energy firms typically carry out credit checks on customers looking to switch over to them.
GettyWe’ve listed all the major suppliers and their policies on sharing data with credit reference agencies[/caption]
But many also regularly report your payment history directly to the credit reference agencies (CRAs) – Equifax, Experian and TransUnion.
This could give your credit score a big boost if you pay your bills on time.
However, it could be severely detrimental if you’re late making payments or choose not to pay your bill at all.
New customers usually undergo credit checks so that suppliers can check if you’re in a position to pay your bills before accepting you as a new customer.
It’s used as a way to protect them from the risk of picking up the bill for customers missing payments.
There are two kinds of credit checks – hard ones leave footprints on your file, while soft ones don’t.
Hard checks are more commonly used but these can damage your score.
This is because lenders could view a lot of marks with concern, and may even turn down your application for future credit.
We’ve summarised whether or not the major energy suppliers, including British Gas, EDF and Ovo Energy, run credit checks on new customers and if they regularly report your payment history.
Surprisingly one of the country’s biggest suppliers doesn’t run any credit checks for new customers – here’s everything you need to know below.
British Gas
British Gas may do a hard credit check for some new customers.
However, there might be some circumstances where it won’t run a check – for example, if the person joining was once a customer of the supplier fairly recently.
However, the company does send all payment history information to all three CRAs.
The information shared includes whether a customer is up to date with their payments or if they are behind or have missed paying a bill.
EDF Energy
EDF Energy does not perform credit checks on any residential customers.
But it does notify the CRAs if a customer has failed to make a payment and hasn’t responded to its communications to discuss a resolution.
If EDF is unable to successfully resolve an outstanding balance with a customer it will issue a written notification to make them aware that a credit default may be applied to their credit file if they do not make contact within 30 days.
E.ON Next
E.ON Next will perform a hard credit check on all new customers.
The impact this has on your credit score is minimal, provided you don’t have too many hard searches within a short space of time.
These hard credit checks stay on your credit report for 12 months.
After a customer joins E.ON, it will start sharing your payment performance directly with Equifax.
For example, if you pay on receipt of bill and you’re up to date with your payments or you pay by monthly direct debit, this will have a positive impact on your credit score.
If you’re late paying your bill, it will report this to Equifax in increments of months.
But if you don’t pay your balance within two months, it will issue a default notice.
This will advise that you have until the end of the month to either clear your balance in full or set up an arrangement to clear the arrears.
If you set up an arrangement, E.ON will report this to the credit reference agency.
This tells other lenders you’ve fallen behind, but are actively taking steps to clear that balance.
Whilst this doesn’t have a positive impact on your credit score, it’s not as impactful as a late payment status.
If you don’t contact E.ON, it will report your account as defaulted to the credit reference agency.
A default is quite severe and will stay on your credit report for six years, even if your balance is paid before the six years is up.
Octopus Energy
When a customer joins Octopus Energy, it will ask their permission to check their credit data with TransUnion.
Octopus shares all payment information with TransUnion at the end of each month.
This includes data on both timely and late payments.
Ovo Energy
Ovo Energy does a hard credit check for every new customer signing up for a pay monthly plan.
The supplier will also tell Experian if you don’t pay your bill in full and on time.
But it will also report timely payments every month – which could improve your credit rating.
Shell Energy
Shell Energy will perform a hard credit check on any customer looking to switch over.
The supplier uses data from both Experian and Transunion to do this.
If you fail to pass the credit check, it doesn’t mean you can’t be a customer.
But you could be asked to pay a security deposit before Shell progresses your application.
Shell Energy will continue to provide payment performance data to the Experian and TransUnion) every month, which may impact your credit file.
Scottish Power
Scottish Power will run a hard credit check on customers looking to switch over to a standard credit plan.
If you don’t clear your balance and fail to pay your bill, Scottish Power will report this to the CRAs.
They will issue a default notice on your account.