Car insurance and credit checks

Wondering if you need a credit check for car insurance? Our car insurance credit check guide will tell you everything 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 will tell you everything you need to know about credit checks and how they might affect your premium.

Rebecca Goodman
Insurance expert
minute read
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Last Updated 18 AUGUST 2022

Do car insurance providers check credit?

Car insurance providers will look at your credit report when you compare quotes to check your details. This is so they can check you are who you say you are – and to lower the risk of fraud. And, if you choose to pay monthly rather than annually, they’ll also do a full credit check. 

Will a car insurance quote affect my credit score?

No. When you compare quotes, insurance providers will do what’s called a ‘soft search’ to check that the details you’ve given them, like your name and address, are accurate. This won’t affect your credit score and can only be seen by you.

However, if you decide to pay for your car insurance monthly, the 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 can be seen by other lenders. 

When you pay for your car insurance monthly, you’re effectively setting up a credit agreement with your car insurance provider. So, they’ll want to assess whether you’ll be responsible about paying the money back.

If you can afford it, it’s always better to pay for your car insurance in one lump sum. Otherwise, you’ll end up paying more as interest will be added to the monthly payments.

A hard credit search leaves a mark on your credit report and can temporarily bring down your credit score – but it should pick up again. However, lots of hard credit checks over a short period of time can damage your score, as it can indicate you’re desperate for credit. 

Top tip

If you decide to cancel your car insurance, make sure you let your insurance provider know. And if you’ve been paying 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 and this may be recorded on your credit report, which will damage your score. 

Any missed payments, intentional or not, can stay on your credit report for up to six years. 

Will my credit history affect the cost of my car insurance?

It can do. The cost of your car insurance is based on a number of things including:

  • Your address
  • Your job
  • Your age
  • How long you’ve been driving and your driving history
  • The make and model of your vehicle
  • Any no claims discount you may have.

But 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 can also be a sign that you’re not reliable at paying back your debts.

The good news is that poor credit doesn’t have to last forever and there are lots of ways to improve your score to put you back on an even footing.

Check out our car insurance premium guide for more information on what can affect the cost of your car insurance.

Can I check my credit report before buying car insurance?

You sure can. In fact, if you want to pay monthly, it’s a good idea to check your credit report 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. 

Compare the Market has partnered with Experian, the largest UK credit reference agency to provide free access to your credit score via the Meerkat app. 

Top tip

It’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 will detail all your credit applications. So, if someone has accessed your details fraudulently, for example, and applied for credit, it will show up here.

Frequently asked questions

Can I still get car insurance if my credit score is low?

You can get car insurance with bad credit, but your choices may be limited. If you want to pay monthly, some providers might reject your application if they think there’s a risk you won’t pay.

Can paying monthly improve my credit score?

If you pay your car insurance plus interest on time every month, it could help improve your credit score over time. Your monthly car insurance payments show up on your credit report, so it’s a way for you to demonstrate you’re a reliable borrower who pays their debts. 

On the other hand, any missed or late payments  will bring down your credit score – your insurance provider could even cancel your policy. 

Setting up a direct debit payment is the best way to ensure 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 your car insurance upfront for the year. 

Paying annually could also work out cheaper because you won’t be charged the interest that’s added to monthly payments.

Will I need a credit check for short-term car insurance?

You pay for temporary car insurance up-front, so there’s no need for a credit check.

Will named drivers on my policy be credit checked?

No, named drivers that you add to your policy won’t need to undergo a credit check.

Can I refuse to have my credit checked?

Insurance providers should let you know before they run a credit check. You can refuse, but that will probably mean your insurance application will be rejected. 

The only way to avoid a full credit check is to pay for a whole year of car insurance in one go. 

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