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Paying car insurance does not technically build credit on its own. But if you use your credit card and make your payments on time, it could have a positive impact on your credit score.
The car insurance comparison and licensed broker app Jerry gathers as many as 50 quotes for you for free, so you’ll definitely be able to find coverage with an affordable monthly payment. And Jerry’s users save an average of $879 per year, too. You can work on improving your credit with all that extra cash at your disposal!
Here’s everything you need to know about how to use your car insurance payments to improve your credit score.
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Paying car insurance bills with a credit card
There are a few indirect ways your car insurance bills can impact your credit score, the most straightforward of which involves paying your premium using a credit card. But there are pros and cons to paying your insurance bills this way.
Benefits
Using a credit card provides a safety net that protects against lapses in your insurance policy. And avoiding missing those insurance payments should be a high priority for any car owner.
If you love saving money on car insurance using Jerry, you’re going to like this next bit of advice, too: paying for insurance in advance using a credit card can save you even more dough.
Most insurance companies offer discounts to customers who pay for their insurance annually or semi-annually (once or twice per year) rather than monthly. Some even have discounts for bi-monthly payments. With a high enough credit limit, you could pay for a year’s worth of insurance upfront and never have to worry about missed payments.
Drawbacks
Having said that, if you’re using your credit card to pay for car insurance, be wary of credit limit utilization. As a general rule, you want to avoid ever using more than 30 percent of your maximum credit, as this can have a negative impact on your credit score.
In other words, if your credit card has a $1,000 limit, you should generally try to avoid putting $301 or more on that card at any one time. You may want to take this into consideration when deciding whether you should use your credit to pay your car insurance bills.
Key Takeaway You can use your credit card to pay for car insurance, but there are pros and cons to doing so—especially on a monthly basis.
Can car insurance harm my credit score?
Arguably the biggest perk of putting your car insurance payments on a credit card is the safety it provides. Missing a credit card payment can hurt your credit, but a lapse in car insurance can have devastating long-term consequences.
Missing a car insurance payment almost always results in fines and fees getting tacked onto your bill. And not paying in a reasonable amount of time might result in the cancellation of your policy altogether. Your premiums would end up being a lot higher when you renew your car insurance.
Worse still, a lapse in car insurance can result in big fines from your DMV, or even the cancellation of your vehicle’s registration. And if you’re still paying for car loans, your auto lender likely has requirements for maintaining car insurance, which can lead to even more fees, fines, and bigger car loan bills.
Key Takeaway Paying your premium via credit card regularly can help boost your credit score—but missing payments can cause serious issues with your credit, your lender, and the DMV.
Jerry can help you save big on car insurance!
Car insurance might not help you build your credit, but saving lots of money on that insurance certainly can! The Jerry app makes finding cheap car insurance a snap. Sign up for free (it takes less than a minute!) and let Jerry find you up to 50 quotes from qualified name-brand insurance companies.
Jerry handles all of the tedious work for you, too. No annoying phone calls or mountains of paperwork to deal with—just install the app, kick back, and maybe set a pillow down under your jaw to protect it from all the dropping it will do when you see how much money you’ll save!
With some thoughtful financial planning, you can take all those car insurance savings Jerry found you and apply them toward improving your credit rating. Paying down your credit cards or loans a bit faster or increasing the limit on a secured card can go a long way toward boosting your credit score. And when it’s time to renew your car insurance, the Jerry app will be ready to help you save again and again.
"After more than 11 years with one insurance provider and our rates increasing each year (through no fault of ours, they said), we had to look for a cost-saving alternative. Thankfully, we found Jerry. Not only were we able to find an annual savings of over $2,000, but they made the switching process incredibly easy! Thanks Jerry!" —Jerry customer
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FAQs
Does paying car insurance build credit?
While your credit score may factor into your overall premiums depending on where you live, car insurance doesn’t have any direct impact on your credit score.
What payments help build credit?
Car insurance payments won’t affect your credit. The best way to improve your credit is to keep up with your credit card payments and loans (car, school, mortgage, etc.).
Will missing insurance payments hurt my credit?
Not directly, but it can (and usually will) increase your insurance premiums. It can also lead to fees and fines from the insurance company, your state’s DMV, and your lender if you’re still paying for the car’s loan.
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