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What happens if I switch energy suppliers with a credit default?

What happens if I switch energy suppliers with a credit default?

Your energy bill is effectively a debt you owe to the utility company for the electricity or gas you use in your home. If you cannot pay your energy bill by the due date, the supplier will try to contact you and collect what you owe. If they can’t contact you, they may report a default against you to one of the credit reporting agencies.

When you apply to a new supplier, other energy providers will be able to see this default when they access your credit file. This may happen before they approve your connection application. While they may still approve your application, they probably won't offer you their best deals.

Which energy suppliers do credit checks in Australia?

By law, all energy suppliers are authorised to request a credit check before they approve your application for a new energy contract. However, not many energy providers insist on conducting a credit check. Also, they cannot perform such a check without your explicit permission.

If you are trying to choose a new energy provider and have credit issues, you could try asking around if the provider offering a suitable contract might insist on a credit check. However, you should remember that energy suppliers cannot refuse your application for a standard contract, which is the contract option controlled by the Australian Energy Regulator (AER).

You can also find out about the information in your credit file relevant to your energy supplier and whether it is accurately reported. Typically, energy providers may want to know if you owed another supplier unpaid utility charges exceeding $150, which you failed to pay within the time provided to you despite receiving notices about default listing the debt. If you think the default has been incorrectly reported to the credit bureaus, you can request a correction. Such a default can be listed on your credit report for a few years. If you’ve paid off a utility debt and the default is still on the file, you could try explaining the circumstances to the energy supplier.

What are my options if I can’t switch energy suppliers?

If you’re looking to switch energy suppliers because you are finding it difficult to pay your bills, a better first step may be to check the hardship provisions offered by your current provider. In Australia, energy providers are legally required to inform customers about their hardship policy, which specifies the different options available to those going through financial difficulties. Such a policy is put in place to ensure that customers don’t lose access to electricity and gas.

The options that providers must offer to customers include exploring payment alternatives, suggesting a more affordable energy plan, checking whether the customer qualifies for government concessions or rebates, and offering tips on saving energy and keeping bills low. You can find out more about your energy provider’s hardship policy by either calling them at the number mentioned on your bill or checking their website. You can also access approved hardship policies on the AER website.

Suppose you aren’t facing financial difficulties, but struggling to get the best energy deal because of your poor credit history. You could look at ways to improve your credit score before applying for or trying to switch your energy connection. Ensuring you pay your energy bills before the due date is one way of boosting your credit score. You could also try to minimise or consolidate other kinds of debt, as these could also impact your credit score.

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This article was reviewed by Kate Cowling before it was published as part of RateCity's Fact Check process.

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