Drivers have been warned that poor credit scores can affect car insurance premiums as motorist get slammed with unaffordable prices.
Insurance companies use credit reports to set monthly premium prices, but as prices reach new highs, many drivers are left in tough situations.
According to experts, while drivers’ scores won’t predict their chances of being in an accident, factors like their payment history and the types of credit they use help insurers predict the likelihood of whether they would make a claim.
Historically, people with good credit history tend to make fewer insurance claims, the expert stated.
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A third of motorists in the UK paid for their car insurance policy monthly
PABut as premiums reach new heights, drivers are now looking for new ways to get cheaper monthly cover.
ClearScore spotted a 92 per cent increase in the number of online searches for “pay monthly car insurance” in the past year as drivers look to pay-monthly deals to split the cost rather than in lump sums.
According to 2022 Financial Conduct Authority data, a third of motorists in the UK paid for their car insurance policy monthly.
ClearScore detailed: “While a high credit score doesn’t guarantee drivers will be offered cheaper car insurance rates, shaping up and improving their credit score might bring down the price of their premiums a little.
“If drivers have been offered premiums that mean they won’t be able to afford the annual cost, splitting car insurance monthly can actually improve their credit score.
“However, paying monthly will add interest to the quoted policy cost, as car insurance providers will essentially be ‘lending’ drivers the cost of their premium, which means they’ll pay for the privilege.
“As long as drivers pay their monthly car insurance policy, plus interest, on time every month, it could improve their credit score over time.”
ClearScore also spotted a 50 per cent annual increase in the number of people searching for “how to get cheaper car insurance”.
Offering tips to drivers on how to reduce prices, ClearScore explained how “actuarial risk” is something insurers using to determine premiums.
A link was found between drivers who renew their insurance at the last minute and those who make a higher number of claims which has caused them to have higher cover costs.
But drivers who secure a new car insurance policy weeks before their existing policy ends are more likely to get better prices.
Insurers also base their prices on past claims data and have found that some jobs are riskier than others, with ClearScore warning people must put down correct job titles.
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Poor credit score can lead to higher car premiums
PAAnother tip is for drivers is to not auto-renew as insurers won’t reward loyalty and may increase premiums.