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You might be aware that having a poor credit score can make it harder to borrow money. But a poor credit score can also affect your car insurance premiums or, in extreme cases, mean certain insurers won\u2019t offer you cover. Our guide explains why and what your options are.<\/p>
If you get a quote from an insurer, it will typically check your credit file just to verify your identity. It\u2019ll do this through a \u201csoft search\u201d, which won\u2019t affect your credit score. <\/p>
If you decide to apply for cover and you opt to pay in monthly instalments, the insurer is effectively loaning you the lump sum for a year\u2019s worth of insurance and letting you repay it in monthly chunks, with interest. So, when you opt to pay monthly, an insurer typically runs a \u201chard search\u201d, which is visible on your credit file. The insurer does this to track your record of borrowing money and repaying it on time to check if you\u2019re likely to make your repayments. <\/p>
If your credit score isn\u2019t great, your insurer might charge more for letting you repay in monthly instalments (even people with a good score are likely to pay interest if they repay monthly). Or it might offer you cover but only if you pay up front in a lump sum. <\/p>
In extreme cases, some insurers might refuse to offer you cover. This is fairly unusual, though. Insurance companies can simply cancel your cover if you fail to pay your monthly premium on time, so this type of lending is considered low risk for most insurers. <\/p>
It\u2019s worth knowing that if you miss a monthly repayment, this can damage your credit score.<\/p>
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