Does not paying your auto insurance affect credit?

Your auto insurance payment history won't affect credit, although late payments may cause other issues.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: May 19, 2022

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Here's what you need to know...

  • As insurance companies do not report to credit agencies, making your payments will not affect your credit score
  • If you don’t pay your auto insurance premiums, this will not impact your credit score, but it may affect your ongoing coverage
  • Some insurance companies may check credit scores before quoting an auto insurance premium

Times may have been challenging, and you’ve run into some financial issues. You may be struggling to pay some bills. If you can’t make your car insurance payments, will that impact your credit? Alternatively, does making on-time payments build your credit?

Does paying for insurance build credit?

If you’ve been juggling bills due to a short-term cash crunch, you may be worried about being able to make your auto insurance premium payment on time. In this case, you may have concerns that a late payment could find its way onto your credit report and affect your score. However, the insurance companies do not report payment histories to rating agencies, so a late payment should not impact your score.  

Can insurance build credit instead? It’s always best to pay your insurance premiums on time and maintain a good payment history. However, this won’t help build your credit as the insurance companies do not report your record to the credit rating agencies.

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What happens if you don’t pay your auto insurance bill?

If you only make late payments here or there, this won’t affect your credit score. However, if you fall into significant arrears or don’t pay your bill at all, the company may initiate debt collection activities. This type of activity could find its way onto your credit report to be accessed by future lenders.

Is there any correlation between auto insurance and credit scores?

Some auto insurance companies may check your credit score when applying for coverage. They will assess your score, which may impact the size of your premium. Companies that match auto insurance and your credit score may determine that an individual with a low credit score might cost them more money over the long term, and they may charge them a higher rate in this situation. However, they consider many other factors when setting premiums, including previous claims, age, and driving history.

What if you don’t pay your insurance bill on time?

While late payments may not affect a credit score, your coverage could be impacted. Some companies may automatically suspend coverage if they do not receive an installment on time or within a grace period for car insurance payments. Should this happen, and you continue to use the vehicle, you may be committing a traffic offense. 

Most states require that you have a minimum level of insurance coverage. Should you be stopped by a law enforcement officer, you could face a fine. They may impound your vehicle. Also, you may be personally liable if you cause a crash when driving without insurance.

Running Into Trouble With the DMV

Insurance companies notify the state DMV whenever there is a lapse in coverage. If you fail to make payments on time, this may result in you getting a letter from the DMV. If so, you need to act quickly, get up to date with the payments, and ensure that your coverage is back on track. 

You must respond to the DMV as there is a risk that they could suspend your vehicle registration and driver’s license. As this may take some time and effort on your part to fix, it’s always best to ensure that you pay the premiums by the due date.

Final Thoughts: Does your insurance payment history affect your credit?

While your auto insurance payment history will not directly affect your credit, you’ll want to avoid any significant payment issues that may be turned over to a collection agency or reported to your state’s DMV. A late payment could invalidate your insurance, lead to a fine, or result in personal liability in the event of an accident.

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