6 min read

How a high credit score could get you cheaper car insurance

Frankie Jones
1 November 2019

From how much you’re charged for energy bills to the interest rate you pay on your mortgage, your credit score affects a lot. But 75% of drivers are unaware that their credit score can affect the price they pay for their car insurance.

New data from ClearScore, which analysed over 9,000 car insurance quotes and credit scores, found that there’s a correlation between elements contributing to your credit score and the premium you’re offered. Ultimately, users with a higher score typically receive lower premiums.

So with the cost of car insurance on the rise, it’s worth taking the time to brush up your score before you renew or take out a policy.

The factors that affect your car insurance premium

When calculating your car insurance policy, a provider will try to paint a picture of how reliable or risky you are as a borrower and how likely you are to make a claim. So when deciding what price to offer you on your policy, lenders will look at a number of factors, including:

  • Age - Generally, the younger you are, the more you’ll be charged for car insurance. This is because you have less experience behind the wheel and so are considered more likely to be involved in a car accident. Once you hit 25 years old, your premium will likely drop.
  • Driving experience - Just like your age, the less experience you have driving, the higher your insurance premium is likely to be.
  • Location - If you live in a built-up area or a neighbourhood with high crime rates, you can expect to pay more for your car insurance.
  • Claims history - If you’ve made any claims in the last 5 years, this is likely to increase your premium (even if you weren’t at fault).
  • Occupation - Some job titles are considered more risky than others to insurance providers. While you need to be honest about your occupation, tweaking your job title ever so slightly might bring down your premium. For example, if you’re a chef, you could try selecting ‘kitchen worker’ to see if it saves you money.
  • Vehicle type - The more expensive your car, the more it would cost an insurer to repair or replace if it’s damaged in an accident, so this will push your premium up. The same goes for the size of your car’s engine - the more powerful it is, the more likely it is to be involved in an accident. This means you can expect to pay more to insure it.
  • Miles driven per year - As obvious as it may sound, the more you drive, the more likely you are to be involved in an accident. So if you use your car for commuting, you can expect to pay more than if you leave it parked on the road most of the time.

Get your free car insurance quote on ClearScore now

So what’s your credit score got to do with it?

Since insurance providers are interested in how reliable a driver you are, assessing your credit risk can help them better predict insurance losses. For example, if you’ve repeatedly missed payments on a credit account in the past, you might appear prone to risky behaviour by a lender. As well as looking at your credit history when deciding how much to charge you for your premium, these are the factors insurers tend to consider:

  • Payment history, including late payments and delinquencies
  • Length of credit history
  • Number and types of credit accounts (such as credit cards and loans)
  • Outstanding debt
  • Credit utilisation (how much of your available credit limit you use each month)
  • Applications for new credit

Just how much impact does your credit score have?

The extent to which your credit history affects the price you pay for your premium varies by provider, as different companies use different algorithms to calculate your quote. But new data has found that people with good credit history tend to make fewer insurance claims, and it’s worth mentioning that if you have a poor credit history, insurers might not let you pay monthly for your insurance. This is because the insurer has to cover you for a year and you just repay them each month, so it’s more of a risk for them.

While a high credit score doesn’t guarantee you’ll be offered cheap car insurance, giving your score a polish before applying could bring down your perceived risk, and consequently the price you pay for your premium. Follow our 10 steps to a great credit score if you’re in need of some inspiration.

Did you know?
When an insurer calculates your annual car insurance premium, they’ll check your credit report using a ‘soft search’. Don’t worry, this won’t impact your credit score and will only be visible to you. But if you choose to pay monthly, the provider might run a ‘hard search’ on your report, as they will effectively be loaning you the money which involves a higher risk for them. A hard search will appear on your report and could affect your credit score.

Get a car insurance quote in minutes

Our personalised car insurance tool makes it easy for you to compare competitive quotes for car insurance from over 100 trusted providers. We use your unique credit report information to pre-fill parts of your journey, so you can see quotes quicker than on other price comparison websites. Find out how much you could save in your ClearScore offers now.

Before you get a quote, make sure all the details in your credit report are correct, as any mistakes could increase your perceived risk and - consequently - the price of your insurance.

by Frankie Jones

Frankie Jones is ClearScore's in-house Copywriter. 

ClearScore exists to make your finances simple.
We offer a free service where you can handle everything to do with credit in one place. In your ClearScore account, you can see your credit score and the full details of your credit report. Your credit cards, mortgages, mobile phone contracts, loans, overdrafts and utilities all on the record. Our goal is to make ClearScore as simple, calm and straightforward as possible. Money is stressful enough.