Get an energy deal with bad credit or no credit check

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By Emma Lunn | Friday, February 19, 2021

You might think that bad credit will only affect you if you want to take out a mortgage or credit card, but it can also affect your eligibility for the best energy deals on the market.

Most energy companies will only accept customers on “post-pay” energy tariffs if they pass a credit check. But it’s still possible to get a decent energy deal if you have bad credit – we explain how it’s done.

Why do energy suppliers perform credit checks?

Like cell phone companies and credit card companies, energy companies will want to be pretty sure that you can, and probably will, pay the money you owe them. They assess this risk by performing a credit check.

Most providers will perform a credit check if you request a postpayment rate. Post-payment rates include those paid by monthly direct debit and those paid upon receipt of invoice. The other type of energy tariff is prepayment using a prepayment meter (we will discuss this later).

However, there are some exceptions. EDF Energy is the only supplier among the “big six” which does not check the solvency of residential customers who request a post-payment tariff.

The other five (British Gas, E.ON, nPower, Scottish Power and Southern Energy) all perform credit checks on potential post-payment customers. Small suppliers Ecotricity, Co-operative energy, Better Energy, and Spark Energy also do not perform any credit checks.

Compare the best energy offers of the moment

Cable.co.uk currently recommends the following energy comparison sites.

How bad is your credit score?

Energy companies that check the creditworthiness of customers will use a credit reference agency. The three UK credit reference agencies are Experian, Equifax and CallCredit.

It’s important to understand that when your creditworthiness is checked for energy, the bar is set much lower than if you had applied for a credit card or a mortgage. Basically, even if you have a bad credit rating, it won’t necessarily be so bad that you will be rejected for a postpayment energy tariff. Energy companies will specifically look for recent debts to energy companies on your credit report, rather than missed credit card payments from years ago.

If the energy company is not happy with your credit check or payment history, they may offer one or both of the following options: have a prepayment meter installed or make a down payment for a rate of post-payment

Prepayment meters

Most homes have a credit meter. This records the energy you use, which you then pay – usually by monthly direct debit or upon receipt of the bill.

If you have a prepaid meter, you will pay for the energy before you use it. This type of energy tariff works in the same way as pay mobile phones. You have to buy energy credit by adding money to a key or smart card, which you then insert into your home’s meter.

Paying for energy this way means that you are never in debt to your energy supplier because you are paying all of your energy up front. Therefore, you won’t need to pass a credit check to get a prepayment meter.

If you accumulate a large debt on a postpay rate and your provider is not happy with the time frame within which you plan to pay it back, it may require you to switch to a prepayment meter. If you don’t cooperate, the provider can get a court order to enter your home and install a prepayment meter.

Prepaid customers pay more

Although prepayment meters allow users to control their energy payments and are less risky for providers, there is a major downside: prepayment tariffs are generally more expensive than postpayment energy tariffs.

The cheapest energy tariffs on the market tend to be online deals for those with credit meters and paying by monthly direct debit. Prepayment customers typically pay around £ 200 more per year than customers of the cheaper post-payment offers.

bad energy credit

This means that people with bad credit who are forced to have a prepayment meter will invariably pay more for energy than people with good credit history.

However, prepayment customers should always look for the best prepayment rate. The offer varies depending on the supplier. Since April 2017 prepayment rates have been capped by the regulator Ofgem. This limits the amount that energy companies can charge prepaid customers, although in general this will always be more than the best postpayment rates.

Other disadvantages of prepayment meters

Only a few providers allow you to recharge your key online or by SMS. With other providers, you will need to visit a participating retailer to reload your card or key. These retailers might not be nearby or open when you need them, or you might lose your card or key.

Also, if you unexpectedly run out of credit, your power will be cut off until you press the emergency credit button. This could mean that your refrigerator loses power when you are away or the heat goes out.

Make a deposit for a post-payment rate

The other option for people with bad credit history is to arrange to post a deposit to their energy supplier before moving to a postpayment tariff. Deposits should be of a ‘reasonable amount’ and are generally in the range of £ 150 to £ 300 per fuel.

The energy company can use this money to pay what you owe if you are behind on your energy payments.

How to switch from a prepayment meter to a credit meter?

To switch from a prepaid meter to a postpaid credit meter, you will need to pay off any outstanding debt on your energy account and, with the majority of suppliers, pass a credit check.

Assuming you’re successful, the Big Six (nPower, British Gas, EDF, E.on, Scottish Power, and SSE) will take your meter from prepayment to credit for free. Some other small providers may charge you for the switch – usually around £ 140.

If you want to switch to a credit meter but your provider will charge you to do so, the solution is simple – switch to a provider who will trade in your meter for free (i.e. one of the big six) and then a Once your credit meter is installed, find the most competitive rate (you don’t have to stick with the company that changed your meter).

Some homeowners like prepayment meters because it means tenants cannot leave a property with a debt to their energy supplier. If you are a tenant and want to switch from a prepayment meter to a credit meter, you will need your landlord’s permission. However, your landlord cannot prevent you from switching providers. So whether you have a prepayment meter or a credit meter, it is up to you to decide which provider you go with.

How can I improve my credit history in order to get a credit meter?

  1. The key is to make sure you don’t have any energy debt and that you have a good payment history with your energy supplier. While you shouldn’t ignore other bills and debts, focus on paying your energy bills on time

  2. Make sure you are registered on the voters list at your current address

  3. Make sure there aren’t any incorrect details on your credit report – check it regularly and if the details are wrong, ask for them to be corrected. End any financial association with former partners

  4. Don’t ask for too much credit, and when your credit application is approved, try to use no more than 75% of your available credit limit.

  5. Make sure you have a checking account and have set up direct debits to pay other household bills

Compare the best energy offers of the moment

Cable.co.uk currently recommends the following energy comparison sites.

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