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Mike Hunter asked:




Most electric companies will run a credit check to determine if a deposit is required when you hook up a new service. The problem with this can be if someone with less than perfect credit, or no credit at all, needs to hook up service, the deposits can be a drain on the bank account. While the local utility companies may require a credit check, there are several things you can do to help minimize the deposit amount. Let’s look at a few alternatives.

Co-Signers

Using a co-signer is going to be the best way to get utilities hooked up without worrying about a huge deposit. If you have a friend or relative that already has utilities hooked up with the electric company in your area, you can find out if they can be used as a guarantor for your account. With this option you may still need to pay a deposit, but it will be much smaller. If you choose to use this option, be sure the person you are asking to co-sign has a good payment history with the electric company and is current on their account.

Pre-Paid Services

Not many states offer this, but a few utility companies do offer pre-paid services. Since deposits can range from $50 to $700 for someone with bad credit, a prepaid solution may be the best option. With this option the customer will place a set amount of money in their account, similar to a prepaid cell phone. When the services start to come close to that amount, the utility company will send a notice, either by mail or email, to alert the customer of the low balance. The customer then has the option to add more money in to their account or the services will be disconnected. There are several benefits to using prepaid services.

A low credit score isn’t a problem Money can roll over during months with low utility usage There will never be any surprises with a utility bill

While pre-paid services aren’t available everywhere, the option is becoming more popular for many utility companies. Since the electric company doesn’t have to spend the time and money tracking down customers who don’t pay their bills, and the customer doesn’t have to worry about a huge deposit, the option is a win-win. Electric companies in Texas, Illinois, Tennessee, and a few other areas have already jumped onboard with this innovative idea. You can contact your local electric conglomerate to find out if the option is available, or will become available in the near future.

Credit Card Security

Just because someone has bad credit, that doesn’t necessarily mean they don’t have a credit card. Often times a utility company will waive the deposit and credit check if you place a credit card on file. Most electric companies will specify that this must be an actual credit card, and not a debit card. This way if you end up defaulting on a payment, they can automatically take the payment from your card. If you don’t have a credit card, look at getting a secured card. Even if you have to fund a secured card with $100, it can still save you money. This may end up costing you a little bit in credit card fees, but it can save you hundreds of dollars in deposits.

Direct Debit Payment Options

Many companies, not just electric companies, will waive a credit check and deposit if you are willing to sign up for direct payments. With this option the money for your bill will be deducted automatically every month from your checking account. Since the money is being paid automatically, the utility company doesn’t have to worry about a bill going unpaid. When you call to set up service, it never hurts to ask if they have this option available. Just be sure you have the money to cover it every month or you will face overdraft fees from your bank, collection fees from the utility company, and other consequences.

Use Your Landlord

If you are renting, many times a landlord will be willing to keep the utilities in their name. This can be a benefit to both parties. The landlord never has to worry about utility services being cut off due to non payment, and you won’t have to mess with trying to get things in your name. Many localities can and will, condemn a house for lack of electricity or water, so this is a benefit to the homeowner to keep the services in their name. If you are unsure, you can simply ask the landlord when you sign your lease if this is a possibility. The money for the bills can just be added on to your rent.

Having bad credit is a fact of life for many people. With bad credit comes additional deposits, securities, and other headaches. If you are moving and need to have electricity turned on, you may not have many options to avoid the deposit. You can always call the local electric company to find out what they are looking for, and if your credit will be assessed. It’s best to do this before the move in date so you aren’t hit with any surprises down the road.

Melanie