Does paying for car insurance build credit?

No, simply paying for car insurance doesn't help you build credit. However, if you pay your monthly car insurance premiums on time and with your credit card, you could improve your credit score. Since car insurance is mandatory, does paying for insurance generate credit? Unfortunately, this is not the case. Having car insurance and paying the bill every month doesn't build credit. Kara McGinley was a senior editor and licensed homeowners insurance expert at Policygenius, where she specialized in homeowners and renters insurance.

Canceling your car insurance doesn't hurt your credit, but it's still not a good idea if you don't have another policy. Paying for your car insurance with your credit card could also mean additional charges and more expensive car insurance in the future. While not paying for car insurance won't affect your credit, it could influence how much you pay for car insurance. Credit agencies won't know if you make all your car insurance payments late or on time, and your credit won't be affected in any way. However, your insurance company could charge you late fees and ultimately completely lose your car insurance coverage.

Auto insurance companies may check your credit score during the initial stages of the insurance quote, but these checks are simplified inquiries. Some car insurance companies will charge a fee if you use a credit card, however, most insurers offer a discount if you pay for your car insurance in full at the beginning of the policy term. Unpaid car insurance doesn't credit your credit and worsens your credit score, but forgetting to pay your credit card bill after using it to pay insurance premiums will. Yes, most major auto insurance companies give you the option of paying your car insurance premiums with a credit card. Unfortunately, while it's important to pay your car insurance premium on time, it doesn't help improve your credit score.

However, a default on car insurance won't affect your credit score unless your debt is sent for collection. While auto insurance payments don't affect your credit, insurance companies do consider your credit when determining how much you'll pay for coverage. Your credit-based insurance score may be just one factor in your car insurance premium, along with driving history, location, age and more.