Car insurance and credit checks: What you need to know
Your credit score can affect your car insurance quotes – and your car insurance payments can affect your credit score. Here’s what it all means for you.
Key takeaways
Poor credit can lead to higher car insurance premiums and limited cover options
Soft credit checks are done when getting an insurance quote, this doesn’t affect your credit score
Hard credit checks are done if you choose to pay monthly, which can temporarily lower your credit score
Age, postcode, car make/model, parking location, job title, and previous claims also affect premiums
What impact does bad credit have on my car insurance?
The main way a poor credit history may affect your car insurance is simply that it can mean higher premiums. Insurers may also have more limited options available for you in terms of cover and excess.
The good news is that you’ll almost certainly still be able to find cover, whatever your credit file looks like.
Do car insurance providers carry out credit checks?
When giving you a quote for your car insurance, providers will run a ‘soft check’ on your credit. This just sources basic information, such as confirming your identity and getting your overall score.
It’s the same whether you’re seeking a quote directly from a provider, or via MoneySuperMarket.
Insurers do this because statistics have shown that drivers with lower credit scores tend to have higher insurance claims rates. So someone with a top-notch score will get different quotes from someone with poorer credit.
The only time a car insurance provider will perform a ‘hard check’ – which gathers more information on your credit than a soft check – is if you choose to pay your insurance in monthly instalments.
Will getting an insurance quote affect my credit score?
No. To get you your quotes, insurers only run soft checks, which have no effect on your credit score.
The check will show up on your file, usually billed as something like “ID check” with the provider named, but it will only be visible to you and won’t change anything.
However, if you decide to pay for your insurance in monthly instalments, the insurer will run a hard check – which does affect your score. Your rating will drop slightly after the hard check is run, though this is only temporary.
Temporary car insurance, meanwhile, has no effect on your credit score at all – and named drivers aren’t even checked.
Does my credit history affect my car insurance premiums?
Yes, it does. The better your credit, the better your quotes.
Of course, this does vary a lot by provider. That’s why it’s a good idea to compare car insurance quotes from multiple providers, so you can see a wider range of quotes available to you and choose the best one – whatever your credit rating.
A number of other factors can affect your premiums too, such as:
Your age
Your postcode
The make and model of your car
Where you park your car at home
Your job title
Whether you have previously made claims
Can you be refused car insurance if you have bad credit?
It’s possible – some insurers may consider drivers with low credit scores too much of a risk. But getting rejected by the entire market is very unlikely. You will still be able to get car insurance from at least a few providers, regardless of your credit rating.
However, it may mean that your options for cover are more limited. Your premiums will also most likely be higher.
Compare car insurance quotes to see what’s available for you.
What’s the best way to get car insurance with poor credit?
A poor credit history won’t stop you from getting car insurance – but there are a few things you can do to make sure you aren’t paying through the nose for it:
Compare your options and shop around: Use our comparison service to find the best quotes for you
Choose plans with a higher excess: This will make your premiums cheaper overall
Lower your cover: You’re more likely to get accepted for car insurance with lower levels of cover
Pay annually rather than monthly: This usually means a lower overall cost, plus the provider won’t run a hard credit check on you
Sharing is caring: If someone close to you, such as partner or parent, is an experienced driver with better credit, pick a policy with them as the primary policy holder
Cancel your old policy properly: Not doing so can mean missed payments, which can lead to a worse credit score
Improve your credit score: In the long term, you can also work to improve your credit score, and sign up to MoneySuperMarket’s Credit core to keep on top of it
