Does Your Credit Score Affect Car Insurance?

A Guide to Car Insurance and Credit Scores

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By Cai Bradley
Updated on Wednesday 13 October 2021

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Car insurance is an expense that all motorists are legally obliged to pay, but because there are so many factors that help determine your premiums, it’s easy to lose track of what really affects the cost of your cover.

One of these factors is your credit rating – do car insurance companies do credit checks? Will your credit score affect your insurance? Does getting insurance quotes affect your credit rating?

In this guide, we explain all you need to know about how credit scores might impact the cost of your car insurance.

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Do car insurance companies check your credit history?

Car insurance companies will do a ‘soft search’ credit check when you compare quotes, but only to check that your personal details are correct.

Does getting car insurance quotes affect your credit score?

As only a soft search is conducted, getting car insurance quotes won’t appear on your credit report and will not impact your credit rating – it is done purely to check that the information you have provided them with is accurate.

Do soft searches affect your credit rating?

A soft search credit check is what occurs when you check your own credit or when a lender, credit card company or insurer checks your credit to ensure that your details are accurate or to preapprove you for an offer.

Soft searches don’t impact your credit score and should have no impact on your future credit applications or insurance applications.

You might like: How to Improve Your Credit Score

What about monthly car insurance?

Pay-monthly car insurance is essentially a form of credit, as you are borrowing from the car insurance company and making monthly repayments, rather than paying for it with one lump-sum as you would with an annual policy.

If you decide to take out monthly car insurance, the insurer will need to carry out a ‘hard search’, which will appear on your credit report and can be seen by other organisations (such as lenders).

As you are getting credit from the insurance company, they will want access to your credit file in order to determine whether or not you will be a responsible lender and will make monthly repayments.

You will struggle to find a pay-monthly car insurance policy with no credit check. There may, however, be some providers offering monthly car insurance for those with bad credit, but you may be better off paying annually if you have previously struggled to manage debt.

Note: Do not mistake monthly car insurance – i.e. paying for your car insurance policy on a monthly basis – with one-month temporary car insurance. The two are very different.

Does your credit score affect car insurance in the UK?

Your car insurance premiums are calculated based on a variety of different factors, including:

Your credit rating should not affect the cost of your car insurance unless you pay monthly for cover. If you have a poor credit history and apply for monthly car insurance, you may be required to pay more in premiums and some providers may even refuse to cover you.

This is because people with bad credit ratings are:

  • Less likely to make payments on-time every month
  • More likely to make a car insurance claim, according to Compare the Market

You should always be wary of paying for your car insurance monthly, as it almost always works out more expensive than paying annually because most providers will charge interest on top.

If you want to pay monthly for car insurance as a way of avoiding the hefty lump-sum, you should always check your credit report first to ensure that it is accurate.

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Get your annual car insurance quote at Compare UK Quotes

Here at Compare UK Quotes, we recommend paying for your car insurance annually, because, despite it being inconvenient to have to fork out hundreds, if not thousands of pounds, it will almost certainly be cheaper than paying monthly in the long-run.

This is mainly because pay-monthly car insurance providers add interest to your premiums, which adds up and leads to a more expensive overall cost.

Get your free car insurance quote here to find out if you could save money. 

For more information on credit scores and car insurance, be sure to check out our related guides:

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