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Why You’re Being Asked for a Utility Deposit
A utility deposit credit check is what triggers the deposit — not your income, and not your current payment behaviour. And more people are triggering one for a reason that has nothing to do with getting worse at paying bills: charged-off debts now stay visible on credit reports roughly twice as long as they used to. The legal seven-year limit didn’t change — lenders simply keep reporting old charge-offs for far more of that window. In Texas, that credit file cannot legally set your electricity rate on a 12-month contract, but it absolutely can set your deposit.
Last updated: 24 August 2026
TL;DR — the utility deposit credit check, explained
- The mechanism: in 2004–2012, about 40% of charged-off debts were still reported after a year. By 2024, 80% were.
- 23 million Americans carry a charged-off credit card balance.
- The FCRA seven-year limit didn’t change — furnisher behaviour did.
- Texas caps your deposit at the greater of one-fifth of estimated annual billing or two months’ estimated billing, and requires interest on it.
- In Texas your credit cannot set your price on a residential contract of 12 months or less — but it can set your deposit. Different rules, and most people don’t know there are two.
- Prepaid electricity is the clean workaround: Texas rules prohibit a prepaid provider from requiring a security deposit at all.
- Internet and home security have no equivalent caps. An ISP deposit can be nonrefundable and interest-free by contract.
Why more people are being asked for a deposit
Definition: stock vs. flow
Flow delinquency measures how many people are newly falling behind. Stock delinquency measures how much broken credit is visible on reports right now. They can move in opposite directions — and they have.
The New York Fed published the explanation in August 2026. In “How Distressed Are Consumers? Reconciling Diverging Credit Card Delinquency Measures,” Lee, Mangrum, Scally, Sinha and van der Klaauw found that the stock delinquency rate is rising “because of a pool of stale, charged-off debts that lenders have been reporting for longer durations, rather than a fundamental worsening in the incidence of delinquency.”
“Between 2004 and 2012, only about 40 percent of borrowers’ charged-off debts were still being reported one year later; by 2024, this figure had doubled to 80 percent.” — Liberty Street Economics, Federal Reserve Bank of New York, 11 August 2026.
The same analysis finds 23 million Americans carrying charged-off credit card balances, and the stock measure rising from 7.6% in 2022:Q3 to 12.8% in 2026:Q1.
Here is the part that matters for your move-in day. Under the Fair Credit Reporting Act, 15 U.S.C. §1681c(a)(4), a charged-off account can be reported for seven years, with the clock starting 180 days after the delinquency that preceded the charge-off. That limit has not changed. Re-reporting doesn’t restart it, and selling the debt to a collector doesn’t restart it either.
What changed is that furnishers now use far more of the window. A charge-off that would have quietly dropped off your file within a year in 2008 is still sitting there in 2026. And a utility deposit credit check doesn’t ask when you last missed a payment — it reads what’s on the file today.
Can a utility check your credit?
Yes — the utility deposit credit check is expressly legal, and the law is explicit about it. 15 U.S.C. §1681b(a)(3)(A) and (F) permit a consumer report to be pulled in connection with a credit transaction and where the requester “has a legitimate business need for the information… in connection with a business transaction that is initiated by the consumer.” Signing up for service is that transaction.
What you are owed when they do. Under 15 U.S.C. §1681m(a), a deposit demand based on a consumer report is an adverse action, and it triggers a notice. You are entitled to:
- notice of the adverse action
- the numerical credit score used and related information
- the name, address and telephone number of the credit reporting agency
- a statement that the agency did not make the decision and cannot tell you why it was made
- notice of your right to a free copy of your report within 60 days under §1681j, and to dispute under §1681i
If you were asked for a deposit and got no adverse action notice, that is worth raising.
What Texas rules actually cap
On the utility deposit credit check, Texas is unusually specific — and its two rules do genuinely different jobs — which is the source of most confusion.
Your credit cannot set your price. 16 TAC §25.475(c)(2)(E): “A REP must not use a credit score, a credit history, or utility payment data as the basis for determining the price for electric service for a product with a contract term of 12 months or less for an existing residential customer or in response to an applicant’s request to become a residential customer.”
That is a price restriction. It applies to residential products with a term of 12 months or less. It says nothing about deposits.
Your credit can set your deposit. 16 TAC §25.478 governs deposits, and it expressly allows a provider to use a credit rating from a consumer reporting agency as a satisfactory-credit test — §25.478(a)(3)(B). What §25.478 gives you instead is limits:
| Protection | What §25.478 provides |
|---|---|
| Maximum deposit | The greater of one-fifth of estimated annual billing or the sum of the next two months’ estimated billings |
| Interest | Required, at the annual rate the PUCT sets each December under Tex. Util. Code §183.003 |
| Refund | After 12 consecutive billings without any late payments; transferred with interest if you switch providers |
| Existing customers | No initial deposit unless you paid late more than once in the last 12 months, or were disconnected for nonpayment |
| Letter of guarantee | Affiliated providers and providers of last resort must offer it instead of cash |
For a household averaging $180 a month, the Texas deposit ceiling works out to roughly $432 — one-fifth of estimated annual billing. Anything above the cap is a rule violation, not a negotiation.
Who can avoid a deposit entirely in Texas — §25.478(a)(3) satisfactory-credit criteria:
- Prior electricity customer within two years, not delinquent, no more than one late payment in the last 12 consecutive months
- A satisfactory credit rating from a consumer reporting agency
- Age 65 or older, and not currently delinquent on any electric service account
- Victim of family violence, certified via a letter developed by the Texas Council on Family Violence
- Medically indigent — household income at or below 150% of federal poverty guidelines, plus either inability to perform three or more activities of daily living or medical expenses above 20% of gross household income
One important limit: the 65-plus and family-violence criteria apply most strongly to affiliated providers and providers of last resort. Competitive providers need only honour the first two criteria, though they may offer more.
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How to avoid a utility deposit
Five ways to pass — or sidestep — the utility deposit credit check entirely.
- Prepaid electricity — the cleanest route in Texas. 16 TAC §25.498 prohibits a prepaid provider from requiring security deposits for electric service. The connection balance to start service is capped at $75 for residential customers. There is no fee to move from prepaid to postpaid later, though the provider may then require a postpaid deposit. Prepaid service also cannot be disconnected on weekends, when payment mechanisms are unavailable, or during an extreme weather emergency. See no-deposit electricity in Texas.
- Use your payment history, not your credit score. If you’ve had electricity service in the last two years with no more than one late payment, that alone qualifies as satisfactory credit under §25.478(a)(3)(A) — regardless of what your credit file says. Providers can obtain that history from a prior provider with your authorization. Ask for this specifically. Many people pay a deposit they didn’t owe because nobody told them this criterion exists.
- If you’re 65 or older, say so. It is a stated criterion, provided you’re not currently delinquent.
- Ask for a letter of guarantee instead of cash. Affiliated providers and providers of last resort must offer it.
- Pull your credit report first — read your file before the utility deposit credit check does. Look for stale charge-offs: Given the reporting-duration change, there is a real chance something on your file is closer to falling off than you think. The seven-year clock runs from 180 days after the original delinquency — not from the last time someone re-reported it. If an item is being reported past that window, dispute it under §1681i.
What about internet and home security?
Outside regulated electricity, the utility deposit credit check becomes a plain contract term — this is where the protections stop, and it is worth knowing before you sign.
AT&T’s Consumer Service Agreement states it plainly: “By applying for or using AT&T Services, you’re giving us permission to obtain your credit information from consumer credit reporting agencies at any time and for any reason.” It may refuse service or require “an advance payment, a nonrefundable payment, or other form of credit requirement” based on your credit rating, insufficient credit history, previous late payments, or fraud — and “We will not pay interest on advance payments or deposits unless required by law.”
Note that second trigger. A thin file is treated the same as a damaged one. If you have never had credit, you are in the same bucket as someone with a default.
Comcast’s residential agreement similarly authorizes credit inquiries and states: “We may require you to pay a refundable deposit when you activate the Services, add Services, or fail to pay any amounts when they are due.” That deposit is credited to your account without interest after 12 months in good standing.
The contrast with regulated electricity is the point:
| Texas retail electricity | Internet / telecom | |
|---|---|---|
| Deposit cap | Yes — §25.478 | No |
| Interest required | Yes — §25.478 | No, unless state law requires it |
| Age-65 waiver | Yes | No |
| Family-violence waiver | Yes | No |
| Refund after 12 good months | Yes, with interest | Sometimes, without interest |
| Can be nonrefundable | No | Yes, by contract |
How other states handle the utility deposit credit check
| State | Deposit cap | Interest | Notable |
|---|---|---|---|
| Texas (competitive providers) | Greater of 1/5 of estimated annual billing or two months’ billings | Required | Refund after 12 billings with no late payments |
| Texas (regulated utilities) | 1/6 of estimated annual billing | Required | Tighter cap than the competitive market |
| Pennsylvania | 1/6 of estimated annual bill | Yes | Explicitly permits credit scoring (52 Pa. Code §56.32) — but no cash deposit from an applicant income-eligible for a customer assistance programme |
| New York | “a reasonable sum… for two calendar months” (PSL §117) | Yes, at a rate the Commission sets at least annually | Refunded after one year without delinquency; no new deposit when a non-delinquent customer moves and keeps the same provider |
Pennsylvania is the interesting one: it authorizes credit screening outright and then offsets it with an income-based exemption. No state verified here prohibits credit-based deposit screening altogether.
The cost squeeze behind all of this
In the 12 months to July 2026, the energy index rose 14.7% and electricity 4.2%, against core inflation of 2.5% and all-items inflation of 3.4% (BLS, released 12 August 2026). The headline energy figure is driven mainly by gasoline, up 24.6% — but the 4.2% electricity number is the one that matters here, because deposits are calculated off estimated billings. A 4.2% higher bill mechanically raises the Texas deposit ceiling by about 4.2%.
So the same household, with the same file behind its utility deposit credit check, owes a slightly larger deposit this year than last — before anything about their behaviour changed at all.
Utility deposit credit check FAQ
Why do I have to pay a deposit for electricity?
Because you didn’t meet the provider’s satisfactory-credit criteria. In Texas those criteria are set out in 16 TAC §25.478(a)(3) and include prior payment history, a satisfactory credit rating, being 65 or older, family-violence certification, or medical indigence. A deposit demand based on your credit report is an adverse action, and you are entitled to a notice explaining it.
How much can a Texas electricity deposit be?
No more than the greater of one-fifth of your estimated annual billing or the sum of your next two months’ estimated billings. For a household averaging $180 a month that’s roughly $432. Regulated utilities in non-competitive areas of Texas have a tighter cap of one-sixth of estimated annual billing.
Do I get my utility deposit back?
In Texas, yes — after 12 consecutive billings with no late payments, with interest at the rate the PUCT sets annually. If you switch providers, the deposit plus interest transfers or is refunded. Internet and telecom deposits are governed by contract instead, and may be nonrefundable and interest-free.
Can my credit score raise my electricity rate in Texas?
No. 16 TAC §25.475(c)(2)(E) prohibits a retail electric provider from using a credit score, credit history or utility payment data to determine the price of a residential product with a contract term of 12 months or less. It can still determine your deposit — those are two different rules.
How do I avoid a deposit entirely?
Prepaid electricity is the clearest route in Texas: providers of prepaid service are prohibited from requiring security deposits, with the connection balance capped at $75. Otherwise, use your prior payment history — no more than one late payment in the last 12 months qualifies as satisfactory credit on its own.
Why is an old charge-off still on my credit report?
It can legally be reported for seven years from 180 days after the original delinquency, and neither re-reporting nor selling the debt restarts that clock. What has changed is that lenders now keep reporting old charge-offs for far more of that window than they used to — roughly 80% are still being reported a year later, against about 40% in 2004–2012.
The utility deposit credit check reads your file, not your life — and since old charge-offs now linger on files twice as long, knowing the criteria that waive the deposit is worth real money on move-in day.
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Keep going
- No-deposit electricity in Texas — how prepaid plans work
- Does paying utilities build credit? — the other direction of the same relationship
- How to switch electricity providers in Texas — once you’re past the deposit
- How to read a Texas Electricity Facts Label — where the real price hides
- First apartment utilities checklist — what to line up before move-in
- How to transfer utilities when moving — timing and order of operations
