Will Paying My Auto Insurance Late Hurt My Credit Score?

Your credit score is an important number. It tells lenders how much risk they're taking on by loaning you money. As such, it's wise to do what you can to keep your credit score in good shape.

One move on your part that has the potential to damage your credit score is paying certain bills late. If you fall behind on a credit card or installment loan payment, that will likely get reported to the credit bureaus and result in a hit to your credit score.

But what if you're late with your auto insurance premiums? Will that damage your credit score?

The answer is, not necessarily. But failing to make your car insurance payments could still have negative consequences.

Your credit score may or may not be impacted

Experian, one of the three credit bureaus, explains that auto insurers typically do not report on-time payments to the credit bureaus. So paying those premiums on time generally won't help your credit score.

Similarly, car insurance companies typically do not report late premium payments to the credit bureaus. If you're late by a few weeks or even months, your credit score may not change one bit.

In some cases, though, your auto insurer may decide to send unpaid premiums to a collection agency. At that point, the collection agency may report the debt as delinquent, resulting in credit score damage.

You risk losing your insurance -- and your car

If you're late paying for auto insurance, it may not affect your credit score at all. But you might face dire consequences regardless.

First, you risk losing your coverage. This usually won't happen when you're a tiny bit late. And it's common for auto insurers to offer a grace period before canceling policies. So you may, depending on your insurer, get a late payment notice offering you 30 days to catch up before your policy lapses.

But if you're really late with your car insurance payment and your policy does lapse, from there, you run into trouble. For one thing, you won't have protection anymore. If you get into an accident, you won't have an auto insurance policy to pick up the tab for your vehicle's damage. And if you cause an accident and aren't covered, the other driver could potentially sue you personally for damages.

Also, state laws generally require drivers to maintain a minimum amount of auto insurance. Failing to do so could result in fines or the temporary loss of your driver's license. And if your license is taken away and you can't get to work, you risk losing your job.

Finally, if you're in the process of paying off your car, failing to have it insured could result in your vehicle being repossessed. Once your auto insurer cancels your policy due to a lack of payment, it will generally inform your auto lender that this has happened. That could put you in violation of your auto loan agreement and cause you to lose your vehicle.

All told, failing to pay your auto insurance may not hurt your credit, but it could hurt you in other ways. If you're experiencing a financial hardship that's making it difficult to pay your premium, contact your insurer and see what you can work out. You may be able to get an extended grace period so your coverage doesn't lapse and you aren't left in the lurch.