Making monthly payments on time can help boost your credit score when reported to the credit bureaus. You might be thinking, why wouldn’t my monthly car insurance payments do the same?
Although that would be a great way to improve your credit, it doesn’t quite work that way. In short, making car insurance payments won’t directly enrich your credit score, but not making them could hurt it. Keep reading to find how car insurance plays into your credit score.
Increasing credit score by paying car insurance
The only way your credit score can improve from paying your car insurance is if you pay your car insurance on-time with a credit card. Then, we recommend paying off the insurance premium balance on the credit card in full to avoid interest charges.
If you get behind on credit card payments, interest and penalties will stack up and your car insurance premium will end up costing you more.
Good credit can lower insurance prices
Paying your car insurance doesn’t directly impact your credit, but having good credit can determine rates by some insurance companies. There are auto insurance companies that use credit-based insurance scores and often pull soft credit score inquiries.
A credit-based insurance score is a risk-assessment methodology that helps auto insurance companies determine the likelihood of you filing an insurance claim. Criteria and scoring can change depending on each company’s credit-based insurance score model.
However, in some states your credit score has no impact on insurance rates and some states prohibit the use of any type of credit score to determine rates.
What type of payments help build credit?
Simply paying your car insurance won’t help your credit score, but these tips below will!
Revolving credit accounts
Credit cards, personal line of credit, and business line of credit fall into the revolving credit account category. Beware of high-interest rates and annual fees. It’s easy to wind up in debt’s deep pockets with plastic money.
As long as your making your payments on time and keeping your credit utilization at 30% or less, you should see a boost in your credit from using this method.
Open accounts are a combination of revolving and installment credit, such as utilities. The amount changes each billing cycle and you’re responsible for paying them off in full. These are a great way to report payments to the credit bureaus.
Third party platforms like Experian use tools like Experian Boost by syncing your account that withdraws your utility payments every month and your payments will be reported every 30 days.
Installment loans are a type of loan allowing you to borrow a set amount of money with a fixed period to repay, such as student loans, auto loans, mortgages, personal loans. For those who are credit challenged, a Credit Builder Loan from MoneyLion is the perfect solution.
There’s no hard credit inquiry needed and you could borrow up to $1000 at competitive interest rates. Our Credit Builder plus members can monitor their credit score 24/7, improve their score by up to 60 points within 60 days and create solid money-saving habits!
Avoid lapsed car insurance
Failing to pay auto insurance could result in lapsed insurance and fines. Typically, after 90-120 days unpaid bills get sent to collections, and derogatory marks are added to your credit score– and they stay on your credit history for 7-10 years.
If you think you might forget to pay your car insurance, you should consider setting up auto-pay to avoid lapsed insurance and collections. Setting up auto-pay with MoneyLion is simple and easy!
First, download the MoneyLion app and sign up for a RoarMoney account. You’ll get access to a virtual debit card right away, complete with your account and routing number. Use your new bank information to set-up all your outgoing bills on auto-pay and never miss a payment again!
Avoid late auto insurance payments with Instacash
Before buying a new car, budget how much insurance you can afford to pay each month. As you’re shopping for a car, you can call up your current insurance provider and get a quote before you buy.
If you’re not in the market to buy a new car, but you’re finding your current monthly premium is too high–call around. Even if your current insurance company was the best price when you got it, shop around auto insurance companies and look for better prices.
With payments coming from all directions, it’s easy to run short on cash here and there. When that happens, Instacash can help cover the costs when you need them. Bad credit or good credit, you could get up to $250 interest-free with no hard credit check. Funds are available instantly when you get turbo delivery for a small fee.