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When searching for a policy, you may wonder if getting car insurance quotes could negatively impact your credit rating. And does a poor credit score mean higher premiums or even rejection?
Our guide delves into credit scores and insurance premiums, including how they’re linked and how it will influence costs and policy options.
Insurers conduct soft credit checks when generating initial quotes. A soft check allows the insurance provider to review the report and how you manage credit. This to confirm identity and residence, but won’t impact your overall credit rating.
Hard credit checks only happen if you choose to pay monthly instalments. Financing insurance premiums this way requires a full credit assessment like any other loan application. A hard check shows if you’ve previously applied for credit. It will also cause your rating to drop slightly each time a hard check is performed.
Simply getting quotes doesn’t affect your credit score or rating at all. Soft checks during the generation of policy prices have no bearing on your overall credit file.
These searches don’t appear on your credit reports that lenders reference when reviewing applications. Only hard credit checks from loan or financing applications appear and are considered.
So, there’s no need to worry about comparison shopping reducing your credit rating. Get as many quotes as you want from various insurers without credit consequences.
The exception is if you finance your premiums through monthly instalments rather than a single annual payment. We’ll look at the implications of this next.
While getting quotes doesn’t impact your credit, your credit profile does influence the premiums that insurers offer you.
Statistics show that motorists with poor credit scores typically have higher claims rates. Insurers charge increased premiums to compensate for this perceived higher risk.
Exact mechanisms vary by provider. In general, excellent credit means lower quotes, while adverse credit leads to higher premiums. Improving your rating can reduce insurance costs.
Your credit score helps indicate your financial responsibility. So, insurers incorporate it into their overall risk assessment to set suitable prices.
It’s easy to examine your credit profile before requesting insurance quotes by performing any of the following:
Checking reports will provide your latest score and full information submitted to lenders such as loans, credit cards and addresses. This helps you understand what insurers see when setting premium amounts.
Here are some tips for reducing premiums if you have a low credit score:
While bad credit increases costs, paying annually prevents your credit from worsening further as well.
It’s rare to be declined altogether. However, you may be offered limited cover options and higher premiums reflective of the perceived risk associated with a bad credit score.
Paying on time monthly can help build a better credit score, but missing a payment will negatively impact your rating. Paying annually will ensure you don’t miss a payment and will prove cheaper than paying monthly.
Usually not, but providers may do soft searches to confirm details, such as address and occupancy.
Only the policy owner/primary driver goes through credit screening. However, adding an experienced driver can help offset poor personal credit scores.
