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Bad credit history: Will you have to pay more for car insurance?

Published 23 May 2016 by

When you’re looking to renew your car insurance, you’ll want to get the best deal possible. If your current insurer puts up your premium, you might decide to move to a different provider.

If you’ve got a bad credit history, you might be worried that this will affect the price of your car insurance premiums. But will insurers credit check you when you apply for a policy? And will car insurance quotes affect your credit history? Let’s take a look at all of the facts.

Paying for premiums

Car insurers use a number of different things to decide on your insurance premium. They’ll look at your age, your job and the car you drive before they make a decision, and they’ll also run a credit check on you.

The insurer might just use this credit check to verify you are who you say you are. They won’t use it to set the price of your basic insurance premium though but it might affect you if you pay for your car insurance monthly.

This is because with monthly car insurance, your insurer will cover you for a year. You’ll then repay this every month, just like other types of credit agreement. This is why it’s generally more expensive than paying for your cover in one go. However, if you can’t afford to do this, paying monthly for insurance might be your only option.

Not all insurers will accept you for monthly payments if you’ve got a bad credit history. Other insurers will accept you but they might ask you to put down a deposit first. That’s why if you’ve had credit problems and you’re on a tight budget, it’s worth shopping around to find an insurer who will let you pay monthly.

Credit history and insurance quotes

When you apply for a mortgage, loan or credit card, lenders will credit check you. If you have too many of these searches in a short space of time, some lenders might think you seem ‘desperate’ for credit – so they might be more likely to reject you.

If you’re looking for a new insurer, you might use a price comparison site or an insurance broker like thinkmoney to find a deal for you. But is this search the same as the ones that lenders carry out?

Searches of your credit history like this are known as ‘soft searches’, meaning you’ll be able to see them on your credit report. However, no one else will be able to see this – it won’t come up when lenders credit check you in the future. The only people who will see it are you and the credit reference agency holding your report.

But if you take out a car insurance policy where you pay for it monthly, this will show on your credit report. Applications for these types of policies will also show on your credit history – so you should stay away from making a lot of these applications in a short space of time.

Having problems with your credit history? Find out a few of the things that could hold your credit history back.