Can paying car insurance build credit? | Chase (2024)

FAQs

Can paying car insurance build credit? | Chase? ›

The short answer is no. There is no direct affect between car insurance and your credit, paying your insurance bill late or not at all could lead to debt collection reports.

However, while paying your car insurance premium on time is important, it doesn't help to improve your credit score. Your credit report includes reported payment history, but the information relates to payments on credit accounts, such as car loans, mortgages, and credit cards.

You can build your credit by using your credit card to make car insurance payments and then by paying off your credit card by the due date. On the other hand, missing credit card payments could harm your credit.

Four states — California, Hawaii, Massachusetts and Michigan — ban companies from using your credit report to determine insurance rates. Instead, companies in these states base rates on your driving record, location and other characteristics. You may also pay more for insurance if you don't have a credit history.

Paying utilities, rent and cell phone bills can help build credit if they're reported to the credit bureaus. If certain bills aren't reported to the credit bureaus, you can consider using a third-party service to report your payments.

Ways to improve your credit score

Paying your loans on time. Not getting too close to your credit limit. Having a long credit history. Making sure your credit report doesn't have errors.

The good news is financing a car will build credit. As you make on-time loan payments, an auto loan will improve your credit score.

According to Equifax, a good credit score is 670 or above. A bad or poor score is 579 or below. Ask the insurance agent about their credit scoring model when shopping for quotes. They can give you an idea of your financial standing based on their rating scale.

According to our rate estimates, the best companies with cheap auto insurance for those with lower credit scores include USAA, Geico, Nationwide and Progressive.

Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.

Does Geico use your credit score? ›

Yes, Geico does use your credit score as a factor when determining your car insurance rates, as do most major insurers. However, credit checks by auto insurers do not harm your credit score and are only done in states where it is legal for your credit score to affect your rates.

Does Progressive check credit history when my policy renews? In states where it is allowed or required by law, we periodically review policies, including credit history.

Our use of credit information enables us to offer lower premiums to more customers and allows us to cover more drivers and homeowners. ► What you can do: Check your credit reports for accuracy and talk to your Allstate Agent for ways to lower your costs. car insurance costs.

Make small purchases and pay them off quickly

Credit bureaus look most favorably on on-time and early payments, even if they're for relatively small amounts. If you're building credit from scratch and are on a tight budget, this could be an effective approach to get some momentum on your card.

The short answer is no. There is no direct affect between car insurance and your credit, paying your insurance bill late or not at all could lead to debt collection reports. Debt collection reports do appear on your credit report (often for 7-10 years) and can be read by future lenders.

Late auto insurance payments often won't get reported to credit bureaus. In some cases, your insurer might send your outstanding bill to collections, which could damage your credit score. Not paying your auto insurance bills could cause you to lose your coverage -- and, potentially, your vehicle itself.

Most insurance companies using credit information will include it as a factor in determining your rate. For example, someone with a relatively high credit score may pay a lower premium than someone with a relatively low credit score.

Phone bills for service and usage are not usually reported to major credit bureaus, so you won't build credit when paying these month to month. However, through certain credit monitoring services, you can manually add up to 24 months of payment history to your report.

If you regularly pay your rent on time and in full, you can have your good payment history reported to credit bureaus to help raise your credit score through a rent-reporting service. Know that any rent-reporting services could require a fee for the service, which is usually paid on a monthly basis.