Car insurance payments do not build credit because car insurance companies do not lend money. Credit scores are based on the contents of TransUnion, Equifax and Experian credit reports, which document our history borrowing and repaying money via loans and lines of credit. Given that on-time car insurance payments are not listed on credit reports, they will not help you build credit.
You can check your latest TransUnion credit report for free on WalletHub to see for yourself that a history of car insurance payments is not included.
The only way to use a car insurance payment to help build your credit is to pay for it with a credit card. Responsible credit card use is the most efficient way to build credit. All major auto insurance companies accept credit card payments. And even if you only got a credit card to pay car insurance premiums, making that type of regular purchase and then paying the bill on time and in full is enough to build credit. You don’t actually need to make purchases with a credit card to build credit, but charging your car insurance premiums has the added benefit of keeping your account active. Too long a period of inactivity could result in your credit card account being closed.
With that being said, not paying for car insurance could wind up hurting your credit standing. If you drive without insurance and get into a serious accident, for example, you could be liable for significant damages and have to pay them out of pocket. And if you don’t have the assets available to cover the bill, that could bring bankruptcy into the equation.
Furthermore, paying your car insurance bill on time is essential to avoiding the potentially serious consequences of an insurance lapse.