Does car insurance affect your credit score?

If you’re about to renew your policy, and you’re wondering:“does car insurance affect credit scores?” Loqbox is here to help. If you choose to pay your car insurance upfront, it won’t usually affect your credit score. But if you want to pay for your car insurance monthly, your payments could show on your credit report, and having good credit could improve the car insurance deals you are offered.

Does car insurance affect your credit score?

It can do, yes. But it depends on how you choose to pay your car insurance. Let’s get under the bonnet! 

Does paying car insurance monthly affect your credit score?

‍If you pay your car insurance monthly, your payments will usually affect your credit score. That’s because the insurance company is allowing you to pay month to month for a year’s worth of car insurance, effectively “lending” you the money.  They’ll also generally run a credit check as part of the application process and in determining how much to charge you for car insurance, so a better credit score could save you money on your insurance payments. 

Does paying car insurance annually affect your credit score?

No, if you choose to pay for your car insurance upfront for the year — in one lump sum — your car insurance is unlikely to affect your credit score, and your payment won’t appear on your credit report.   That’s because you are just buying your insurance from your provider in one go. There’s only a soft credit search and it doesn’t show on credit reports.

Do car insurance quotes affect credit scores?

‍No, searching for car insurance and auto insurance quotes doesn’t affect your credit scores. When you compare policies from various providers they will only ever do a soft credit search on your credit report. This is simply to establish that you are who you say you are. Soft searches are only visible to you, so car insurance quotes can’t affect your credit score. But the story can be different when you apply for car insurance. 

Do auto insurance companies check your credit when you apply?

‍Yes, as mentioned above, car insurance companies check your credit report to make sure your personal details are correct. They do this regardless of how you choose to pay to prevent identity fraud. This is just a soft credit check which is invisible to lenders and can only be seen by you. 

If you want to pay monthly, rather than annually, they will generally go into more detail. 

In this situation, car insurance providers check credit scores because monthly payment plans are credit agreements. This hard credit check will leave a record on your credit report. 

You can read more about hard vs soft credit checks here.

Does paying car insurance build credit scores?</H3>

‍If you’re wondering: “does car insurance increase your credit score?”, the answer once again depends on how you pay for it. Paying monthly car insurance can build credit because it is a credit agreement with your car insurance provider which shows on your credit history. If you pay car insurance annually, it won’t help to build your credit score. 

If you make all of your payments in full and on time, car insurance can improve credit scores in the UK . But does missing a car insurance payment affect your credit score? 

Yes. Your monthly payments will be reported to the three main credit reference agencies (CRAs) in the UK: Experian, Equifax, and TransUnion. That means that any missed payments will appear on your credit reports and can affect your credit scores. Late or missed payments could damage your ability to access credit in the future. 

‍If you pay for car insurance annually, a missed payment won’t directly impact your credit score. However, that doesn’t mean you should stop paying, of course. Car insurance is a legal requirement to drive, and there are serious penalties if you don’t have it (even when parked). 

Does your credit score affect your car insurance?

Okay, so now you know how car insurance can impact your credit score. But does your credit score affect your auto insurance? Simply put, yes it can. If you have a low credit score, car insurance providers may consider you too risky to lend to if you apply for a monthly payment plan.

‍Your credit score can also affect your auto insurance by pushing up premiums. Car insurance providers want to know how likely you are to make a claim. So they check your credit score, as well as things like your age, job and your address. Higher premiums mean having to pay more for your car insurance. So having a great credit score can keep costs down. 

So, how can you build your credit score before you get car insurance?

While car insurance and credit scores aren’t always directly linked, having a good credit score can help to get your auto-insurance application accepted and give you the best chance of lower premiums. So, what can you do to keep your credit score in check? You can read more about credit scores and what impacts them here.

‍For a quick and proven way to boost your credit score you can get started with Loqbox for £2.50 per week. When using all of our credit-building tools, full members have increased their credit scores by 300 points in just three months. We help you to grow your credit score by reporting your responsible behaviour to the main CRAs in the UK. There are no hidden fees, no hard credit checks, and no hassle.

‍Improvements to your credit score are not guaranteed.

You can read more about how car finance affects your credit score here.