Letter of Credit for Lights: How to Skip the Deposit in Texas

A letter of credit is one of the most underused tools for avoiding a deposit on your light bill. If you’ve paid your bills on time at a previous light company, you might be able to skip the deposit entirely at a new one — even if your credit score isn’t great.

Here’s how it works and how to get one.

What Is a Letter of Credit?

A letter of credit is a document from your previous light company that says: “This person had an account with us and paid on time.” That’s basically it. It proves you’re a reliable customer, which can override a low credit score when you’re signing up with a new company.

Under Texas law (PUCT §25.24), a light company must accept a letter of credit as an alternative to a deposit if it meets certain conditions.

What the Letter Needs to Include

For a letter of credit to work, it typically needs to show:

• Your name as it appeared on the old account
• Account number at the previous company
• Service dates — at least 12 consecutive months of service
• Payment history — confirmation that you paid on time (no more than one late payment in 12 months)
• The company’s contact info so the new company can verify it

The letter should be on company letterhead or sent directly from the old company to the new one. Some companies accept it by email, others want it faxed or mailed.

How to Get a Letter of Credit

Step 1: Call your previous light company’s customer service line. Ask for a “letter of credit” or “payment history letter” for establishing new service.

Step 2: Tell them you need it to show 12 months of on-time payments. Be specific — if you don’t ask for the right thing, you might get a generic account summary that doesn’t help.

Step 3: Ask them to include all the details listed above. Most companies have a standard format for this.

Step 4: Get it in writing. Ask for email delivery if possible — it’s faster and you’ll have a digital copy.

Timeline: Most companies can produce this within 3-5 business days. Some do it same-day if you ask nicely and your account is in good standing.

Which Light Companies Accept Letters of Credit

Under Texas law, all light companies operating in deregulated areas of Texas are required to accept a valid letter of credit as an alternative to a deposit. That said, the process varies:

• Some companies have a specific form or portal for submitting letters of credit
• Some companies want you to email or fax it to a specific department
• Some companies will verify directly with your old company if you give them permission

The easiest approach: when you’re signing up with a new company, tell them upfront that you have a letter of credit. They’ll tell you exactly how to submit it.

For a broader look at all deposit alternatives, check our deposit waivers guide.

What If You Don’t Have 12 Months of History?

If you haven’t had service for a full 12 months, a letter of credit probably won’t work. But you still have options:

• Prepaid plans — No credit check, no deposit, no history needed. You can start today. See our prepaid guide for how it works.
• Compare light companies — Different companies have different credit thresholds. One might approve you with no deposit while another wants $400. Our deposit checker shows you what’s available.
• Deposit payment plans — Some companies let you split the deposit over 2-3 bills instead of paying it all upfront.

What If Your Old Company Says No?

If your previous light company won’t issue a letter of credit, it’s usually because:

1. You had late payments — If you were late more than once in 12 months, they can’t certify on-time payment.
2. Your account is too old — Some companies only keep detailed records for a certain number of years.
3. You still owe them money — If there’s an outstanding balance, they may not cooperate until it’s paid.

If reason #1 applies, a letter of credit isn’t your best path. Focus on comparing light companies to find one with a lower deposit requirement, or go prepaid to get lights on now.

The 12-Month Strategy

Here’s something most people don’t realize: once you’ve had 12 months of on-time payments with ANY light company — including a prepaid one — you can use that history to qualify for better plans.

This is the path a lot of people take:

1. Start with prepaid — Get your lights on today, no credit check needed
2. Pay on time for 12 months — Build that track record
3. Get a letter of credit — Your prepaid company can confirm your payment history
4. Switch to a cheaper fixed-rate plan — Use the letter to skip the deposit

It’s not instant, but it works. We break this down step by step in our path to traditional plans guide.

The Bottom Line

A letter of credit can save you $200-$400 on a deposit — money that stays in your pocket instead of sitting in a light company’s account for a year. If you have 12 months of on-time payments behind you, get that letter before you sign up anywhere new.

If you don’t have the history yet, don’t stress. Prepaid plans get you started today, and in 12 months you’ll have the track record you need.

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Related reading:

• How to Write a Deposit Waiver Letter for Your Light Company (Template Included)
• Texas Light Deposit Refund: How to Get Your Money Back
• First Apartment? How to Get Lights With No Credit History

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This guide is for informational purposes only and does not constitute legal or financial advice. For official rules, visit the Public Utility Commission of Texas. NoDepositLights.com is powered by Compare Power (PUCT License BR190020).