Car insurance and credit checks
Wondering if you need a credit check for car insurance? Our car insurance credit check guide tells you all you need to know about credit checks and how they might affect your premium.
Wondering if you need a credit check for car insurance? Our car insurance credit check guide tells you all you need to know about credit checks and how they might affect your premium.
Do car insurance providers check credit?
Car insurance providers carry out credit checks as part of their assessment process. They’ll initially check your credit report to make sure you’re who you say you are and reduce the risk of fraud.
If you choose to pay for your insurance monthly, rather than annually, your insurance provider will also do a full credit check.
Do insurance quotes affect your credit score?
No, getting an insurance quote won’t affect your credit score. When you compare quotes, insurance providers do what’s called a soft search to make sure that the details you’ve given them are correct. Only you can see this and it won’t affect your credit score.
If you choose to pay for your car insurance monthly, your insurance provider will usually carry out a hard search, looking at your credit history in more detail. This will show up on your credit report and other lenders can see it.
When you pay monthly for your car insurance, you’re setting up a credit agreement with your car insurance provider. So, they’ll want to make sure you’ll be responsible about paying the money back.
It’s always better to pay for your car insurance in one lump sum if you can afford it. Otherwise, you’ll have to pay interest and it will cost you more overall.
A hard credit search leaves a mark on your credit report and could lower your credit score – the good news is, this should only be temporary. But multiple hard credit checks in a short space of time can damage your score, as it could suggest you’re desperate for credit.
Does a quote from Compare the Market affect my credit score?
Don’t worry, searching for a quote with us won’t affect your credit score. Again, we’ll do a soft search, which providers can’t see.
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Top tipIf you decide to cancel your car insurance, make sure you let your insurance provider know. And if you pay monthly, you’ll need to tell them you’re cancelling your Direct Debit. If you don’t, it will look like you’ve missed payments, which could damage your credit score. Missed payments – whether intentional or not – can stay on your credit report for up to six years. |
Does my credit score affect my car insurance?
Your credit score could impact the cost of your car insurance. If you have a poor credit history, you may pay more for car insurance. That’s because insurance providers consider people with bad credit more likely to make car insurance claims. Bad credit could also be a sign that you’re not reliable at paying back your debts.
The price of your car insurance is based on a number of factors, including your:
- Address
- Job
- Age
- Driving history
- Car make and model
- No-claims discount.
The good news is that poor credit doesn’t have to last forever and there are ways you could improve your credit score.
Check out our car insurance premium guide for more on what can affect the cost of your car insurance.
Can I check my credit report before buying car insurance?
You can check your credit card before you buy car insurance. And, in fact, if you want to pay monthly, it’s a good idea to do so to make sure there are no mistakes.
You can check your credit report for free using one of the three main credit reference agencies: Experian, Equifax or TransUnion.
Top tipIt’s a good idea to keep an eye on your credit score, even if you’re not looking to buy car insurance. Your credit record shows all your credit applications, so if someone fraudulently accesses your details and applies for credit, it will show up. |
Frequently asked questions
Can you be refused car insurance for bad credit?
Some insurance providers may refuse your application if you have a bad credit score. But there are many insurance providers out there, so by shopping around, you should be able to find the right deal for you.
Can I still get car insurance if my credit score is low?
Yes, you can get car insurance with bad credit, but you might find your choice is limited. If you want to pay monthly, some providers may reject your application if they think you won’t pay.
Does paying monthly for car insurance affect my credit score?
If you pay your car insurance, plus interest, on time every month, it could improve your credit score. Your monthly car insurance payments show up on your credit report, so this is a way to demonstrate that you’re a reliable borrower who pays their debts.
Any missed or late payments will lower your credit score – and your insurance provider could even cancel your policy.
Setting up a Direct Debit is the best way to make sure you never miss a car insurance payment.
Will I need a credit check if I pay annually?
No, there’s no need for a credit check if you pay upfront for your car insurance. Paying annually could also be cheaper as you won’t be charged interest.
Do I need a credit check for short-term car insurance?
You pay upfront for temporary car insurance, so there’s no need for a credit check.
Are named drivers on my policy credit checked?
No, named drivers you add to your policy won’t need a credit check.
Can I refuse to have my credit checked?
Yes, you can refuse a credit check, but it will probably mean your insurance application is rejected. Insurance providers should let you know before they run a credit check.
The only way to avoid a credit check is to pay upfront for a year of car insurance.
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Rebecca Goodman - Insurance expert
Rebecca Goodman is a freelance financial journalist who specialises in insurance, personal finance and consumer affairs. Rebecca regularly writes for national newspapers including The Independent and The Mail on Sunday on a wide-range of financial topics. She covers everything from money-saving tips and holiday advice to investigations into how energy efficient appliances can cut the cost of household bills and the impact donating money can have on those in need. Along with features in national papers, Rebecca also writes news stories for websites including Yourmoney.com and The Money Edit.