Does car insurance affect credit score?

8 minute read Published on Nov 11, 2023 by BrokerLink Communications

Close-up of man hand reading car insurance and getting ready to sign.

Many people wonder whether credit scores impact car insurance and vice versa. The truth is that your credit score has the ability to impact your car insurance premiums, and similarly, once you have car insurance, the payments you make or don’t make on your policy can affect your credit score. Keep reading to learn more about credit scores and auto insurance in Canada.

What is a credit score?

First, let’s explain what a credit score is. A credit score is a three-digit number representing how likely a person is to pay their bills. In other words, it is an indicator of a person’s financial health, stability, and responsibility. Credit scores are calculated by credit bureaus using various pieces of information. Three of the main credit bureaus in Canada are TransUnion, Experian, and Equifax, and they tend to use information like your payment history, outstanding debt, and length of your credit history when calculating your score. Some may also take into account your income. Factors that will positively influence your credit score include having a long-established credit history and making all payments on time. Meanwhile, factors that may negatively affect your credit score include having a high amount of debt especially compared to the amount of credit that is available to you, a short credit history, a high number of credit inquiries, and several late payments.

The impact of credit scores on car insurance premiums

Many car insurance companies across Canada will look at your credit score when determining your premium. Specifically, they will pull your credit report to find out your credit score and credit history as this helps them assess your risk level. Research suggests that policyholders with lower credit scores may be more likely to file insurance claims. Conversely, policyholders with high credit scores are less likely to file insurance claims, which makes them a lower risk investment for the insurance company. Given this, it’s important to maintain a high credit score. Those with high credit scores may benefit from lower rates than those with poor or low credit scores. In fact, if you are able to improve your credit score over time, notify your insurance provider as they might lower your rate when it comes time to renew car insurance. However, it’s worth noting that your credit score is far from the only factor that an insurance company will consider when calculating your rates. They will also look at factors like:

  • Where you live (and where you regularly commute)
  • Age
  • Model, make, and year of vehicle
  • Past claims
  • Average mileage
  • Driving experience
  • Driving record
  • Insurance history
  • Deductible amount
  • Regulatory bodies
  • How you use your vehicle
  • Gender

Tips to improve your credit score in Canada

Now that you know how and why credit scores influence car insurance in Toronto and across Canada, you may be wondering what you can do to improve your credit score. The reality is if you want to save on your car insurance, improving your credit score can help you do so. Therefore, BrokerLink has put together the following list of tips to help you improve your credit score:

Check your credit reports regularly

The first tip if you want to improve your credit score is to check your credit reports regularly. This is the only way to know what your current credit score is, which you need to know if you want to improve it. Most consumer reporting agencies, like Equifax and TransUnion, offer free credit reports to customers. Get into the habit of reviewing these regularly, in part so that you can track your improvements but also to make sure that the information on the report is accurate. For example, check for any signs of fraud or identity theft, and if you notice any, report them as quickly as possible.

Make all payments on time

Making all payments on time is a crucial tip if you want to improve your credit score and benefit from lower insurance rates. Your payment history is a major factor that is considered in your credit score calculation, with late payments taking a serious toll on your score. As such, avoid late payments at all costs. If you find it hard to remember your various payment deadlines, set up automatic payments or reminders on your smartphone or laptop.

Lower your credit utilization rate

Keeping your credit utilization rate as low as possible is another way that you can improve your credit score. For those that don’t know, your credit utilization rate is the amount of debt you have compared to the credit that is available to you. The goal is to keep this rate below 30%. You can do this by reducing your spending or even by asking your credit card company for an increase to your credit limit to account for the amount you are spending.

Do not apply for too many new accounts at once

Applying for too much credit in a short time span is a major red flag to credit bureaus, and it can quickly lead to a higher credit score. Plus, opening new lines of credit can decrease the average length of your credit history, and the longer your credit history, the better off you will be.

Don’t close old accounts

Leaving old accounts open, even if they are not in use, can help you improve your credit score. Assuming these accounts have been paid off, leave them open if it’s feasible to do so, as this will increase the average length of your credit history, which in turn, can boost your score.

Other factors that influence car insurance premiums in Canada

Your credit score is not the only factor that has the ability to influence your premiums. As mentioned, there are many other factors that will come into play, like your age and location. We outline a few of the most important ones below:


Age matters when it comes to car insurance. In fact, it is one of the first factors that an insurance company will consider. Why? Since insurance companies equate age with experience, and those who are younger tend to have less driving experience, making them more likely to get into an accident on the road. However this does not mean that because you are a mature new driver your rates will automatically be lower, as driving experience tends to be a big factor in determining your insurance rates.


Your home address will be used to assess your risk level, as an insurance company will research the likelihood of you getting into an accident or suffering a loss where you live. For example, they will look at the crime rate in your neighbourhood. If theft rates are high, then your vehicle may be at a higher risk of being stolen, which in turn could influence your premium. Further, if you live in a high-density area, like a city, where there is lots of traffic, you may be more likely to get into a car accident, and thus your rates will also be impacted. Finally, if the place you live is prone to weather-related incidents, such as floods or wildfires, this could also influence how much you pay for car insurance.

The type of car you drive

The type of vehicle you drive - in particular, its make, model, trim, and year - can all impact your car insurance rates in Canada. When an insurance company assesses your car, they will look at factors like its value, condition, speed capabilities, safety rating, and whether it is equipped with certain safety features or anti-theft devices. They will also research theft rates to determine if the car you drive is more frequently targeted by thieves. Generally speaking, cheaper or used cars tend to be less expensive to insure than expensive, luxury cars.

How often you drive your car

How often you drive your car is yet another factor that can influence the price of car insurance in Canada. Driving more puts you at a higher risk of getting into an accident. Thus, if you spend an above-average amount of time on the road, you can expect your rates to be higher. Alternatively, if you spend a below-average amount of time behind the wheel, your rates are likely to be lower. In fact, depending on how little time you spend driving, you might even qualify for low mileage car insurance, which can save you a lot of money.


The reason that gender influences auto insurance premiums in Canada is due to the fact that studies show that male drivers are more likely to get into car accidents than female drivers. As such, female drivers across most age groups tend to pay less for car insurance than male drivers.

Claims history

An insurance agent will carefully review your claims history when assigning your premium. They will look at how many car insurance claims per year were made to gauge your likelihood of filing a claim in the future. Typically, policyholders with higher amounts of claims may have to pay more for car insurance. For more information on insurance claims or to have questions, like “Can you cancel a car insurance claim?” answered, contact BrokerLink.

The impact of car insurance on credit scores

Now that you have an understanding of how credit scores can impact your car insurance premium, let’s quickly dive into the topic of how car insurance can impact your credit score. Generally speaking, car insurance companies in Canada do not report insurance payments to credit bureaus. This means that your car insurance policy will not appear as part of your credit report. That said, if you miss your car insurance payments, your insurance company is within your rights to send the unpaid balance to a collection agency. In turn, the collection agency is likely to report the account to the credit bureaus, and this is when your car insurance policy can impact your credit scores. If a debt collector reports that you have outstanding payments on your car insurance plan, this can lead to a drop in your credit score. It is worth noting that not all insurance companies will bother reporting you to a debt collection agency. Instead, they may simply choose to cancel your policy due to non-payment. A cancelled policy has other consequences, such as making it more difficult and expensive to obtain insurance in the future. Learn more about cancelled or expired car insurance renewal in Canada by reaching out to BrokerLink.

Contact BrokerLink for more information on car insurance and credit scores in Canada

If you want to learn more about how car insurance and credit scores impact one another, reach out to a licensed insurance advisor at BrokerLink today. One of our advisors would be happy to explain how your credit score can influence your car insurance premium, and conversely, how missing your car insurance payments can affect your credit score. As car insurance experts, a BrokerLink broker can also provide insight into the different types of auto insurance out there, such as accident benefits coverage, as well as give you a free auto insurance quote.

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