How Your UK Credit Rating Can Affect Your UK Car Insurance Premiums

So you’ve never had a parking ticket, speeding ticket, been picked up for drunk driving or had any points on your driving licence. In short, you are the model UK driver. And yet, when you compare your car premium payments with your friends, you find out that you are paying more them. How can that be so?

The first answer is that you may simply have chosen the wrong UK car insurance provider to insure your car with. The second, and lesser known reason, may well be that your UK credit rating is having an affect on your UK car insurance premiums!

Credit rating

A credit rating is given to a borrower in the UK on the chances that they are going to be able to repay the debt they borrow. Comprising the credit rating will be:

• the amount of debt you have registered against your name
• whether or not you have ever defaulted on any payments
• whether or not you currently have any outstanding unpaid due debts
• whether or not you have had any county court judgements made against you

All this information is then used to assess your credit risk.

How is this relevant?

Now, you may well be asking yourself who the fact that you have failed to make a credit card payment on time can be relevant to whether or not you are a good driver. And, truth be told, you would have a valid point. Nevertheless, in computing your risk as a driver, most motor insurance companies in the UK will ask a credit rating reference agency to undertake a credit rating against you. If the credit rating is particularly bad, you may even find that the motor insurance company in the UK is not willing to insure you.

How do you avoid this?

You may now be asking yourself how you can avoid having your credit rating affect your chances of getting cheap car insurance in the UK. The answer here is two-fold:

• first, and most practically, you can try and arrange to have your UK motor insurance provided to you by an insurance company operating and advertising on the internet. The reason why this may work is because most internet providers of car insurance in the UK do not undertake credit rating checks as part of their online car insurance quotes;
• second, you can elect not to create too much debt and maintain a healthy credit rating, which is prudent financial advice in any event.

However, it does seem both a little strange and a little unfair that if you have just decided to buy a new home, you could well find that this has an affect on the amount of UK car insurance premiums you’ll be expected to pay next year.