Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insuran...

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Chris Harrigan has an economic degree from Limestone College and an MBA from Clemson University. He previously managed auto insurance claims for Enterprise Rent-A-Car. Currently, he is using his business and insurance expertise to provide insurance data analysis and visualizations to enhance the user experience.

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Reviewed by Chris Harrigan
Former Auto Insurance Claims Manager Chris Harrigan

UPDATED: Apr 13, 2022

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Here's what you need to know...

  • Car insurance does not automatically improve a credit score
  • Paying insurance premiums with a credit card may improve a credit score
  • Payments on car insurance may be added to credit files
  • Credit scores may be lowered due to unpaid insurance debts

There are three credit reporting agencies that gather information on people’s credit usage:

A FICO score is determined from the information gathered by each credit reporting agency. FICO is a separate company than the credit reporting agencies. The FICO score is calculated using a combination of different factors that include:

  • The payment history
  • The amounts owed
  • The length of credit history
  • The Credit types being used
  • New credit that has been extended

Each factor represents a percentage of the total score and all factors are used to determine your FICO score.

The purpose of using this information is to analyze how well a person can handle their debt.

The history of how payments have been made and the total amount that is owed will represent the larger factors that are used in calculating a FICO score.

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Car Insurance Premiums are Not Considered Debt


FICO uses debt information that has been supplied by the three credit reporting agencies to determine the FICO score for a person.

But insurance companies do not report car insurance payments that are being made by an individual. Since credit reporting agencies do not receive insurance premium payment information that information is not included on a credit report.

Since FICO uses only debt information to calculate your FICO score and insurance premium payments are not considered to be debt by the credit reporting agencies that means that your payment history with your insurance company will not allow your credit score to improve.

Not all information is gathered by the credit reporting agencies. Here are the types of debt that are used that help to determine your credit score is:

  • Credit cards
  • Retail Accounts
  • Installment loans
  • Finance company accounts
  • Mortgage loans

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Car Insurance Premiums Are Partly Determined By Your Credit Score

Car insurance companies determine premiums by looking at risk that is associated with a driver. One of the risks they look for is a bad credit rating. The premiums that are charged are frequently determined based on the credit score that the driver has.

Insurance companies use what is called credit-based insurance scores that comprise in part the FICO credit score that is used. Other factors are also used.

Some of the other factors that determine an insurance score can include:

  • Your credit rating
  • Your history of insurance
  • Your driving record
  • Your claims history

If you have a higher credit score you could pay less for your car insurance. Insurance companies do not give equal weight to the insurance score so it is a good idea to compare different car insurance companies to get the best premium and coverage you can.

The insurance score assists an insurance company to determine the risk for the car insurance policy. Some studies have shown a connection between a low credit score and the likelihood an insured will be in an accident.

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Insurance Inquiries Do Not Affect Your Credit Score

Insurance inquiries do not affect your credit score so comparing car insurance rates with different companies will not lower your FICO credit score.

Information that is not listed on your credit report does not have an impact on your credit score.

Some Car Insurance Information Can Lower Your Credit Rating


Credit reporting agencies and FICO look at your use of debt and other areas like a judgment or a bankruptcy.

If you had an unpaid debt for car insurance the insurance company would be able to get a legal judgment. That judgment can lower your credit rating.

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Lower Insurance Premiums Could Improve Your Credit Rating

When monthly bills are lower it can make paying bills easier. A credit score takes into account your payment history so making payments by the due dates can improve your credit score.

One of the best ways to reduce car insurance premiums is comparison shopping to get the best premium.

Improve Your Credit Rating

Credit reporting agencies have a process for you to add positive account histories to your file. They are not obligated to add positive account histories but you can check with them to see are willing to add them.

If the credit reporting agencies do add positive account histories to your file such as car insurance premiums, you can use this information to assist when applying for new credit.

Since car insurance is not considered to be a credit-based debt this approach is not guaranteed to work. The credit reporting agencies do not have to add the information if they do not want to.

Improving Your Credit Score


A credit score is determined by your use of debt and a credit card is one kind of debt that credit reporting agencies monitor.

That means that paying your car insurance premiums with a credit card instead of a debit card or personal check may be able to improve your credit rating as long as you pay your credit card bills by the due dates.

In order for this approach to succeed you must pay your credit card payments on time. Paying your credit card bill late can potentially hurt your credit rating.

Car insurance does not help you build credit or improve your credit rating since the premium payments are not considered by the credit reporting agencies to be debt. When you owe money to a car insurance company and it is not paid you can hurt your credit rating.

You can try to add positive credit information on your credit file, but the credit reporting agencies are not obligated to add the information.

One approach for building your credit with car insurance is to pay your insurance premiums with a credit card.

If you make your credit card payments by the due dates you could improve your credit rating. The cost of car insurance is usually based on factors that include your credit score so a good credit rating can result in you paying lower car insurance rates.

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