curve

How car insurance affects your credit score

Your credit score, or credit ranking, is an important factor in a lot of big life decisions, from getting a loan with a bank to getting a mortgage on a house. This number signifies to lenders how likely you are to pay back money, based on your financial history.

But it’s not just the bank that looks at your credit score, in fact, insurance companies do so as well.

Does car insurance go on your credit report?

Whether your car insurance will be a factor on your credit rating depends on how you pay it. If you decided to pay for your car insurance premium in one lump sum, then it’s unlikely to have any effect on your credit score. This is because, your credit rating looks at how you are able to pay the money back, and as such, if you are paying the full sum in one transaction you’ll be showing you are able to.

However, if you pay your car insurance monthly, it can influence your credit score. This is because by paying monthly, you are entering into a form of credit agreement with your insurer; a monthly payment scheme like this is effectively a loan.

Whenever you apply for any type of loan or apply for a credit card or a mortgage it means that the bank, or in this case insurance company, checks your credit to determine whether you’ll be able to pay them back by doing a ‘hard check’.

Whenever a hard check is done this leaves a mark on your credit score. Although having a small amount of these is normal, having a large amount can be an indicator of someone who isn’t in a strong place financially which can have a negative effect on your score.

This is why paying your insurance in one payment won’t affect your credit report. In this instance, the car insurance credit check that will be done will be a ‘soft check’. With these soft searches, the main aim is to ensure you are who you say you are, and not to utilise the credit-based insurance scoring. This will still leave a mark on your credit report, however, only you will be able to see this mark.

LEARN MORE: How do license points affect car insurance?

Driving in UK landscape

Does getting an insurance quote hurt your credit score?

Are you searching for insurance and wondering if getting insurances quotes affects your credit score? It’s only natural that when you are in need of insurance, whether car insurance, home insurance or any kind, that you shop around to look for the best deal. However, can getting all of those quotes made up hurt your credit score?

The good answer is that no, getting a quote won’t have any effect on your score. This is because, when you get a quote at most an insurance company will run a soft credit check, which will show up on your report only for you and not for insurers or banks.

It’s only when you go through with your application that a hard check might be done, and that should only be if you are opting for a pay-monthly contract.

You should be aware, that if you decide to opt-out of your contract in your initial 14-day cooling-off period then that hard check will continue to be on your report, as well as the new insurance application you take out. This might not be a problem, but if you are trying to improve your credit score it’s best to be avoided.

If you are unsure what insurance to go for, why not utilise our temporary insurance policies to cover the gap between one policy ending and another beginning? This way, you can give yourself more time to make an informed decision.

LEARN MORE: How can I make my car insurance cheaper?

How does your credit score affect your insurance cost?

Your credit score is just one small part of the bigger picture that goes into calculating your insurance cost. From your job title to where you live, there are myriad factors that affect your insurance price, and your credit score can be a small part of that. So, although having a bad credit score might affect your insurance, it won’t be the only thing you are examined on.

Something that has also been found is that people with a bad credit score are more likely to make an insurance claim which is something that will definitely see your cost go up.

LEARN MORE: Why is my car insurance premium so high?

Here at Dayinsure, we offer insurance solutions including temporary car insurance for non-UK residents and even short-term learner cover. So, if you need insurance for a short period of time, we can get you covered in as little as 15 minutes and better yet, you only pay for what you use. This can be a great compromise for those who use someone else’s car every-so-often but don’t want to pay for an annual policy.

For more guides, tips, and advice, make sure to head to our news page.