Energy bill warning as switching suppliers could hit credit scores – and how to avoid it

HOUSEHOLDS are being warned that their credit scores could take a hit if they're looking to switch energy suppliers.

Energy companies typically carry out credit checks on customers looking to switch over to them.

This is so they 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 can damage your score - lenders could view a lot of marks with concern, and may even turn down your application for credit.

But as many households are being clobbered by a cost of living crisis and falling behind on bills, experts have warned that those looking to switch could see their credit scores take a further hit.

Hargreaves Lansdown senior personal finance analyst Sarah Coles said: "A hard credit check will affect your credit score, and make it more difficult to borrow, which adds insult to injury for struggling households."

She warned households against making a switch if they are looking to get on the property ladder soon.

"It may also make it more difficult to qualify for a mortgage if you have lots of recent hard checks," she said.

"Rising house prices and mortgage rates have already made getting a mortgage difficult enough, so if you are considering remortgaging, it may well be worth switching energy company until after you have secured a deal."

While AJ Bell's head of personal finance Laura Suter said households need to beware of making "lots of applications to different providers in a short space of time".

This is because it could be seen as a "red flag" to lenders.

Which energy providers do hard credit checks?

The Sun asked the major energy suppliers what their policy was on performing hard credit checks on customers.

EDF said it won't do any credit checks on customers looking to swap over to it - but others do.

Shell Energy will perform a hard credit check on any customer looking to switch over, as well as British Gas.

Bulb will run one on every customer when you've accepted your new deal and started the switchover process.

Scottish Power will run a hard credit check on customers looking to switch over to them on a cash payment plan - which is where you pay for the energy you've used on a monthly basis.

Octopus, Eon, Ovo Energy and Utilita did not respond to The Sun's questions at the time of publication.

Do energy companies perform hard credit checks in any other situation?

Yes - some suppliers will perform a hard credit check on exiting customers looking to move off a prepayment meter.

This includes British Gas and Scottish Power.

Again, this will leave a mark on your credit file - too many marks can damage your credit score. 

If you have a poor credit score and are looking to switch over, you may be asked to cough up a deposit worth hundreds of pounds.

Suppliers can charge a security deposit to customers looking to switch over to them if they are worried they may not be able to afford payments.

One Sun reader was charged £470 by Ovo Energy to move over - and then struggled to afford proper food.

Shell Energy said it charges security deposits too, ranging from £150 to £300.