Does Paying Car Insurance Build Credit?

Does Paying Car Insurance Build Credit?

Simply paying most of your normal monthly bills each month like your car insurance, utilities, and health insurance will not help you actually build your credit rating. Even if you pay on time faithfully every month like clockwork.

However, if you stop paying these same bills on time or even fall behind on those payments, it can damage your credit fast.

And while this doesn’t seem to make a bit of sense, there is a sound reason for it. That’s because credit it calculated only by what information is sent to the credit bureaus who take that information to calculate your credit score.

That means your car insurance company and utility companies don’t report on-time payments to the credit bureau but oftentimes they will report those times you fall behind or they have to send you to collections.

Yes, I know it would be so nice to get credit for all the good stuff we do. But when it comes to credit, it doesn’t work that way.

How Your Credit is Calculated

The credit reporting system is made up of three main players: consumers (that’s us), credit bureaus, and financial companies.

Credit scores are used by lenders to make decisions about whether or not to offer you credit. When creditors and lenders check your credit, they’ll very likely do so with one of the major Credit Reporting Agencies, TransUnion, Equifax, and Experian.

These three agencies retain information on more than 200 million Americans. The data the bureaus have in your credit files is used to calculate your credit scores. Your credit scores are determined by five major factors:

  1. Payment History
  2. Debt Usage
  3. Age of Credit Accounts
  4. Types of Accounts
  5. Number of Inquiries

However, the payment history portion of your score is only taking into account your payments made on your credit cards and loans – not car insurance and other bills.

There’s a New Program That Might Change This

Experian has a program that can change all that called Experian Boost. As of now, it serves as a way to help individuals who don’t have a lot of credit sources like loans and credit cards.

It is an opt-in program that works by using “alternative data,” such as phone and utility bills. It uses positive data from phone and utility payment records once you give Experian access to the account you use to pay those bills.

That can help raise your Experian FICO 8 scores (there are many other scores, but FICO 8 is widely used in credit decisions).

The other two major credit bureaus, TransUnion and Equifax, haven’t introduced similar products. And while Experian’s algorithm raises most credit scores, it doesn’t raise all of them. If it lowers yours, you can always opt-out.

How Paying Bills With a Credit Card Can Build Credit

While in most traditional situations, you will not get positive credit (outside of that warm feeling in your heart) for paying your regular household bills on time.

But there is a way to hack this process to help you build some credit for paying those same bills.

The basic premise is to use a credit card to make those payments whenever possible. You then pay off that charge at the end of the month and of course always paying on time.

So instead of using your credit cards to pay for things you may not even need, try using it to pay your bills. Just know that you still are only getting “credit” for the credit card payment and not the bill payment.

When Paying Bills With a Credit Card Doesn’t Make Sense

Remember, when building your credit it’s always best to keep things simple because those missteps count. You also only want to do things that make sense.

For example, if your utility company charges fees for using a credit card then it doesn’t make sense to pay more for the same bills just to use a credit card.

It also doesn’t make sense to pay interest on your bills. This is why it’s so important to pay that credit card charge at the end of each month – again, on time.

Finally, when paying any bill with a credit card you must keep your credit utilization in top of mind. That’s simply a measurement of how much of your available credit is currently in use.  

The Consumer Financial Protection Bureau (CFPB) recommends keeping your credit utilization ratio under 30%. So if paying any bill with a credit card puts the total amount of credit you’re using over the 30% mark, you may want to consider another payment method.


It would honestly be really nice to be rewarded for our diligence and discipline to pay our bills on time every month. But the reality is that it doesn’t work that way.

The important thing to focus on is how credit bureaus are paying attention to the need of reporting alternative credit sources. That means things may be different down the road.

Remember, staying the course to keep your financial health in top condition is a major win – yes, even now!

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