Do car insurers check my credit score?

If you apply for any sort of credit, including a mobile phone contract, lenders will look at your credit score. What they see could affect the types of deals you get and the interest you’re charged, but what about car insurance?

We find out if car insurance providers check your credit score and if they do, how it affects what you pay.

Will insurers check my credit score?

When you compare car insurance quotes, insurers won’t necessarily check your credit score but they will usually check your credit report. They’ll use your report to verify your personal information and confirm details including your name, age and address. This type of check is called a ‘soft search’ and won’t be visible to anyone but you.

When do insurers check credit scores?

Insurers will check your credit score (also known as your credit rating) if you ask to pay for car insurance in monthly instalments. In contrast to a soft search, this type of check is called a ‘hard search’. It allows lenders (including insurance providers) to dig a little deeper and look at your credit history in much more detail.

Hard searches will show any loan or credit agreements you currently have and have had in the past, and whether you’ve made repayments on time.

What’s important about hard searches is that they are visible to all lenders who access your report and leave what’s commonly known as a ‘footprint’. The more credit you apply for, the more footprints on your file.

Does getting a car insurance quote affect my credit rating?

No, getting a quote won’t affect your credit rating. For the purpose of the quote itself, the insurer will only carry out a soft search to confirm your details.

However, if you ask to pay for your car insurance in monthly instalments, the insurer will run a hard search against your credit report which could affect your credit score.

Remember – a hard search means the lender will leave a footprint on your report. the more footprints there are, the riskier you’ll appear to other lenders as it suggests you’re struggling with money.

Can my credit rating affect car insurance costs?

This depends on how you pay for your car insurance. If you’re paying for the policy in one go (upfront), then your credit rating shouldn’t have any effect on your premium. You’ll only pay the amount you were quoted.

If you ask to pay for the policy in monthly instalments, then your credit rating will affect your premium. This is because you’ll be entering into a credit agreement with the insurer – they’re providing you with a year’s worth of car insurance on the promise you’ll pay them back each month. For the convenience of spreading the cost, you’ll also be charged monthly interest.

Interest rates (APRs) for paying monthly now typically range between 20% and 40% (for example, Swinton currently charges approximately 35.6% APR). Recent market analysis suggests that opting for monthly instalments can cost drivers over £300 more per year compared to paying for the policy upfront.

To work out how much interest to charge you, insurers will look at your credit score. A good score means you’re more likely to pay back what you owe on time. As a result, you’ll be offered the most competitive (lowest) interest rates. A poor credit score means you’re more likely to pay higher rates.

It’s also worth pointing out that some research suggests people with a low credit score are more likely to make an insurance claim – which can also increase what you end up paying.

How do I check my credit rating?

In the UK there are three main credit reference agencies (CRAs): Equifax, Experian, and Transunion (formerly CallCredit). They each have their own credit scoring system, which can be confusing as their ranking bands are not consistent. Your credit history is kept by all three main CRAs and different lenders use different agencies so you should check your report with all three.

You can get access to your Equifax credit rating and credit report from ClearScore for free. Note, NimbleFins has been acquired by ClearScore.

By law, the information kept by CRAs must be correct so if you spot anything wrong with your records, you should let them know as soon as possible.

Can I get cheap car insurance with a poor credit score?

Paying upfront for your policy upfront is the most effective way to avoid high 'premium finance' charges, which consumer groups have criticized for being akin to high-interest loans. For many drivers, the price gap between paying annually versus monthly can be as high as 30% to 57% depending on the insurer and your specific risk profile. If you cannot afford the lump sum, even a 0% purchase credit card is often a significantly cheaper alternative to the insurer’s monthly plan. So this is one way to get a cheaper car insurance policy.

Insurers consider all sorts of things to calculate your premium, including your age, job and claims history. So, while your credit score might influence what you’re charged (more so if you ask to pay monthly) it’s not the only factor that will be considered.

As a general rule, no matter what influences your premium, paying for it upfront is the cheapest way to get car insurance. If your credit score isn’t great but you have a credit card, you could use this to pay for your policy in full. Needless to say, you’ll need to keep up with your credit card payments.

Other ways to keep car insurance costs down, include:

For more advice about cars and car cover, head to our motor insurance hub or why not start comparing quotes right now.