Although insurance companies don’t report to the credit bureaus, late insurance payments that are taken on by a collection agency may still end up on your report. Since your credit report may be used to determine your car insurance
rates, it’s important to make your payments on time and aim for a high credit score. Payment history accounts for 35% of your FICO credit score—that’s more than any other determining factor. If you’re looking to improve your credit, you might be wondering if paying your car insurance will help build your score. Important as it might be, unfortunately, making on-time payments actually won’t build your credit directly. Still, your credit history and your car insurance can influence each other in other ways.
Here’s more information about the relationship between car insurance and credit reports.
Do car insurance companies report to the credit bureaus?
No, insurance companies don’t report payment or claim information to national credit bureaus.
For the three major credit reporting agencies—Experian, TransUnion, and Equifax—the payment history portion of a credit score is determined by payment activity from borrowed sources, like mortgages, student loans, credit card loans, and car loans
. However, some insurers will check your credit score
when determining your insurance rate, so making on-time payments and maintaining a good credit score is in your best interest if you want to save on your premium. RECOMMENDEDNo spam or unwanted phone calls · No long forms
Will your car insurance ever affect your credit report?
While car insurance providers don’t report to credit bureaus, that doesn’t mean your insurance payments will never have an effect on your credit.
If you’re late on car insurance payments and your insurance provider passes those missed payments onto a collection agency, it might end up on your credit report, where it could linger for seven to ten years. That could make it more challenging if you need to apply for a loan from a lender in the future.
MORE: The best car insurance for bad credit drivers
Do car insurance companies check your credit?
Your car insurance payment history may not show up on your credit report, but some car insurance companies will check your credit report and consider it alongside other factors—like your driving record
, claims history, age, and location—when determining your insurance rate
. A higher credit score could suggest to an insurance provider that you will consistently make on-time payments, while a lower score could raise questions about whether you’re able to do so. Studies have also shown that drivers with low credit scores are more likely to file more expensive insurance claims.
As a result, higher credit scores are typically rewarded with less expensive premiums, while lower credit scores may see higher rates—and the difference between a low credit score and a high one could make a difference of several hundred dollars in a premium.
Consumers are entitled to one free credit report
annually via www.annualcreditreport.com
. This is helpful to monitor your credit regularly so you can catch red flags for identity theft early to correct errors and minimize the harm done to your credit. There are states, however, that limit insurers’ use of credit information, or prohibit the practice of credit-based insurance scores outright. That list includes California, Hawaii, Maryland, Massachusetts, and Michigan, to name a few.
If you’re not sure whether your own insurance provider uses your credit information, you can always check with your insurance agent to find out, and if so, understand how it’s used.
4.7/5 rating on the App Store | Trusted by 5+ million customers and 7 million cars4.7/5 app rating | Trusted by 5M+ drivers Can car insurance payments help you build credit?
Your car insurance premium payments aren’t reported to national credit bureaus, so they won’t help you build your credit score directly.
That said, making on-time payments is one of the most important factors in determining a credit score, so making regular insurance payments can help you build spending habits that, in turn, boost your credit.
By making car insurance payments on time, you’ll also ensure they don’t get turned over to collections, which could have damaging effects on your credit.
There are other ways you could make your auto insurance payment build your credit score, however.
For example, you could set up your insurance payments through your credit card, which could count toward your payment history on your credit report. You’d just want to make sure you pay off the balance in full within the billing period to avoid paying interest on it. One other consideration here is that credit utilization, or the percentage of your available borrowing credit you use, also plays a role in determining your credit score—so you’d want to make sure that adding your insurance payment would keep it within a reasonable amount.
Of course, making on-time insurance payments is important for other reasons. Late payments could make you subject to late fees and higher premiums. Non-payment could even result in the cancellation of your insurance policy, and driving with a lapse in insurance coverage
comes with costly consequences in the short and long term—especially if you end up getting into an accident. MORE: What is a good credit score for a car loan?
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