Does My Car Insurance Policy Affect My Credit Score?


Making on-time payments on your car insurance policy is important, but not necessarily for reasons related to your credit score. While your credit history can impact how much you pay for car insurance, being late to make a payment on your policy won’t damage your credit score.

Does Car Insurance Appear on Your Credit Report?

Car insurance companies don’t report your premium payments to the credit bureaus, so your policy doesn’t appear on your credit report.

As with other types of accounts such as utilities and medical bills, however, your insurer may send an unpaid balance to a collection agency if you stop paying your bill. At that point, the debt collector will likely report the account to the credit bureaus, which can hurt your credit because it signifies that you didn’t pay your bill as agreed.

Instead of reporting late payments or sending a bill to collections, though, insurance carriers may simply cancel your policy.

That’s not to say you can feel free to skip your car insurance payment if you don’t want to pay it. If your coverage lapses due to non-payment—or for any other reason—it can result in higher insurance premiums in the future.

Since insurance policies don’t usually show up on credit reports, your credit score is probably safe from damage if your insurer doesn’t send the account to collections. Other things that won’t show up on your credit report include:

  • Income
  • Age
  • Marital status
  • Bank account information
  • Level of education
  • Criminal records

Does Your Credit Affect Insurance Rates?

While your car insurance policy will never impact your credit score, the opposite may be true. According to the National Association of Insurance Commissioners, 95% of auto insurance carriers use what’s called a credit-based insurance score to calculate premiums in states where the practice is allowed.

The score is based on your credit history but isn’t the same as the traditional FICO® Score that lenders use, though they consider many of the same factors.

States that prohibit or limit the practice of using credit information in insurance include California, Hawaii, Maryland, Michigan, and Massachusetts. Additionally, Washington state has banned insurance carriers from using credit scores to set policy premiums through 2024, and Utah and Oregon have prohibited using credit histories for setting rates in certain situations.

Even in states where there aren’t such limitations, insurance companies typically can’t use a credit-based insurance score as the sole basis for increasing rates or for denying, canceling, or refusing to renew a policy.

As a result, having good credit can help when you’re shopping for a new insurance policy or when your insurance company renews your policy. The opposite is also true. While a low credit score alone may not be enough to cause a premium hike, it can have that effect if there are other factors at play.

Check Your Credit for Opportunities to Improve

Having good credit is important not only when you need financing but also for your insurance policies. Take some time to check your credit score and review your credit report to get an idea of where you stand and also to spot areas of your credit file that need to be addressed. There are three credit reporting agencies where you may check your credit score and history.

Depending on what you find, be proactive about making the necessary changes to your credit habits to increase your credit score. Potential options include:

  • Getting caught up on past-due payments and making all your payments on time going forward.
  • Paying down credit card balances to reduce your credit utilization.
  • Filing a dispute if you find information on your credit report you believe to be inaccurate.
  • Avoid applications for new credit unless you absolutely need it.
  • Keeping old credit card accounts with positive histories open, even if you no longer use them.
  • Asking a loved one to add you as an authorized user on their credit card account.

As you work on building your credit, it’s also important to watch out for potential inaccuracies or even fraud.

Regardless of how you approach building your credit history, the key is to be proactive and consistent with your efforts to maintain momentum for long-term success.