Importance of Having a Good Credit Score for Car Insurance

Of the many factors that insurance companies consider in setting premiums, one of the most important is your credit score. It may seem a little strange at first. But your credit score plays a role in the amount you pay for your car insurance.

Do You Need a Good Credit Score for Car Insurance?

Credit Score for Car InsuranceIt certainly helps if you have a good credit score for two reasons. The score indicates your ability to pay on-time, and it helps statistically in terms of setting your premium rates. Your credit score is a reflection of your ability to pay bills on-time which makes it easier to obtain loans. Regarding your car insurance, the higher your credit score, the more likely you are to pay your bills on-time which may mean a lower rate.

What does the stat say?

Plus, statistics show that people with good credit scores are less likely to get into an accident or file a claim with a car insurance company. While it may seem unconnected at first, it’s likely that those who have excellent credit scores and thus have cash-on-hand simply pay for small repairs themselves rather than risking a rise in their insurance rates.

Can You Get Car Insurance with a Bad Credit Score?

The answer is yes, even if your credit score is awful you can still get car insurance. This is because car insurance is mandatory in the UK. This means even if your score is terrible the insurance companies are obliged to offer it to you.

However, you can expect to pay more for a bad credit score, so be prepared to see higher rates particularly if you are paying month-to-month. You can alleviate that to some extent if you pay all of your insurance in one single payment. Another alternative is searching for car insurance with no credit check in the worst scenario.

What is a Good Credit Score?

Get Your Credit Report and Improve itCredit scores run from 0 to 999; a good one is considered to be 881 at least by lenders. However, every insurance company will have their set of numbers based on the statistics that they use to set the premiums. Since credit scores are only part of the equation when it comes to setting rates, individual insurance companies will have their range of credit scores to consider.

This means that your credit score may be lower than 881 and still qualify as good for the insurance company in terms of setting rates.

Does Car Insurance Quotes Affect the Credit Score?

Your credit score can be affected by the number of searches that are made within a particular time frame. Too many searches that result in rejections may negatively affect your score because it may appear that you are desperate.

When the insurance company runs a credit check, it will leave behind an indication that a search was made.

However, the search itself will be marked as such in terms of identification such as “insurance quote” or “ID check”. This will not affect your credit score as the purpose of the search is not for credit purposes, but merely identification of your credit score.

It takes some time to reach a good credit score. But the effort will be worth it in terms of receiving lower insurance rates and having stronger borrowing power. If you are looking for ways to reduce the amount paid to car insurance companies, consider raising your credit score as one method that offers extra benefits.

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