Does your credit score affect car insurance in the UK? And can you get car insurance with a low or poor credit rating?
Whether you’ve accumulated debt over time, recently lost your job or simply haven’t built up your credit score yet, the cost of your car insurance premiums could be impacted by a negative credit score – in severe cases, you could be turned down for cover all together.
Is a car insurance policy affected by your credit score?
Insurance providers take a number of factors into consideration when pricing up car insurance premiums for their customers.
The age of both the insured driver and the vehicle can have a significant impact on the cost, while industry professionals will also examine the make and model of the insured car and the policyholder’s occupation, driving history and address before making a final decision.
What many people don’t realise, though, is that many car insurance providers will also take your credit score into consideration, with many finding that they can’t get car insurance because of a bad credit rating.
Although it may seem unfair, car insurance providers see your credit score as a fair indicator of how reliable you are (both financially and in day-to-day life). Statistically speaking, those with a poor credit score are seen to be more likely to make a claim on their insurance policy. It is this increased risk that forces car insurance premiums to rise.
Do all car insurance companies check your credit score? Can you get monthly car insurance with bad credit?
Car insurance for bad credit customers can be difficult to come by.
When you take out car insurance on a pay-monthly basis, you are effectively entering a credit agreement with your insurer – to qualify for this, it is almost guaranteed that you will be subject to a car insurance credit check. This will be a soft check on your credit report, so it won’t have a further negative impact on your credit score.
Usually, the only way to get around this check is to pay for a whole years’ worth of cover up-front – but with the average cost of car insurance coming in at almost £500, this can be near impossible for many.
Read more: A complete guide to credit scores in the UK
When it comes to car insurance, many people find themselves in a lose-lose situation where they can’t find an insurer to offer them pay-monthly car insurance, but also (understandably) can’t afford to pay for a whole years’ worth of cover up-front.
Even insurers who are willing to offer those with bad credit a car insurance policy on a pay-monthly basis are likely to request a deposit up-front – the size of this deposit varies from insurer-to-insurer, but most will request a payment for 2-3 months’ worth of cover.
I’ve been refused car insurance – what next?
If – for reasons relating to your credit score or otherwise – you have been refused car insurance, Bobatoo’s recommendation is to shop around until you find a company willing to offer you cover.
Realistically, there will always be an insurer willing to cover you (if you’re willing to pay a premium price) – finding that cover, though, isn’t always an easy task.
To find the cheapest car insurance quote for your personal circumstances, we recommend visiting a car insurance price comparison website like Confused.com – they will do the hard work for you, narrowing down your choice to a handful of reputable providers.
Remember, if you think there is a chance that you could be refused car insurance, be sure to begin looking for a new quote well before your current policy expires – not only can it be cheaper to purchase cover a few weeks in advance, it’ll also give you plenty of time to shop around without risking your existing policy running out.
Do car insurance quotes affect your credit score?
So, we’ve established that a credit score can have an impact on car insurance quotes – but how about the other way around? Does getting a car insurance quote (or multiple quotes) affect your credit score?
Luckily, the answer is no – shopping around to find the best deal will not have a negative impact on your credit score.
The check that is completed by insurers is known as a ‘soft check’ and is similar to the check that is done when you check your own credit score, or a company checks your credit report as part of your credit check. These reports do not show up on your record and cannot be seen by any companies who look into your report in the future.
What does a soft credit check show?
A soft credit check shows the same information as a hard check – the only difference is that a soft check doesn’t show up on your report.
A credit search will show what money you owe, where you live (and have lived), when you have applied for credit and how well you have managed previously borrowed money. It will also show a number of personal details such as your name, address and income.
A hard check can cause damage to your credit score as it implies that you are looking to borrow more money – this damage is usually only short-term, so long as you prove that you can handle the extra burden without overspending.
Read more: Ways to increase your credit score in the UK
How can I get cheap car insurance with bad credit?
Those with a poor credit score are usually the ones who need the cheapest car insurance premiums – unfortunately, that isn’t usually how it works.
Luckily, though, there are a number of ways in which you can minimise the cost of car insurance with bad credit. These include:
- Paying for cover in one go – you’ll avoid hefty interest rates by doing so, and your credit score shouldn’t have an impact.
- Look for specialist cover – some providers pride themselves in offering car insurance for bad credit customers.
- Change your car – if you have an expensive, powerful car then your insurance premiums will be higher. If you can, try to drive a smaller vehicle with a less powerful engine.
- Avoid add-ons – you may be paying for extras that you do not need, such as breakdown cover. Removing these will reduce your premiums.
- Drive less – reducing your mileage will also reduce your insurance premiums, so make sure you aren’t claiming to drive more than you actually do.
What is the cheapest car insurance?
Whether you have a bad credit score or not, the best way to find a cheap car insurance quote is by shopping around on price comparison websites.
Confused.com is a popular option, offering quotes from over 100 of the UK’s most reputable insurance providers – all you need to do is enter a few quick details about yourself and your vehicle and they’ll do they hard work.