Is Bad Credit History Blocking Your Motor Trade Policy?

If you are making money from the motor trade industry, you need motor trade insurance. Whether you're a small independent dealership, a bodyshop specialist working as a sole trader or a small garage, you need a motor trade insurance policy in order to operate legally. As well as keeping you on the right side of compliance, it protects you, your customers and any vehicles kept on your premises.

If you've recently been denied a policy or had your motor trade insurance cancelled, it may be as a result of a bad credit history blocking your policy. While this can be worrying, there's no need to panic.

Here, we'll look at why this happens and what you can do about it.

How Does Bad Credit Affect Motor Trade Insurance?

Having bad credit can make it a bit harder to get motor trade insurance; it might lead to higher premiums, limited cover, or, in some cases, make it more difficult to find a policy that suits your needs.

This is because the motor industry is considered very high-risk due to the razor-thin margins, the expense associated with claims and the operational and financial risks inherent in the industry. As such, insurers can be loath to take a risk on sole traders with a history of poor credit, especially if they have recent bankruptcies or CCJs, as these indicate that an individual has defaulted on previous debts.

Prospective insurers may carry out a combination of hard and soft credit checks when deciding your viability for insurance, and these may affect what sort of policy you can buy from them.

Hard And Soft Credit Checks: What's The Difference?

A soft credit check is used to determine your suitability for insurance or credit by providing an overview of your financial history. It is usually carried out by a third party when searching for an insurance policy and getting a quote. This kind of check does not affect your credit history, and based on your credit history, you may even be pre-approved for a policy.

A hard credit check is carried out by companies extending a line of credit rather than a third party, such as a credit broker or a price comparison website. Insurers will use this if you opt to pay for insurance monthly. This is because you effectively finance the cost of the annual policy, usually through a third-party creditor. Hard credit checks can have a temporary effect on your credit score.

Does My Driving Record Affect My Motor Trade Insurance?

The answer is yes, it can. If you have recent motoring or criminal convictions, insurers may well perceive you as “high-risk”. This does not mean that you will be unable to buy a policy. However, you may be expected to pay a higher premium or pay for your policy upfront rather than monthly.

Can Anyone Get Motor Trade Insurance​ With A Broker?

Despite these challenges, there is a good chance that you can find the insurance you need to protect your business, your customers and your vehicles. Specialist UK insurance brokers offer tailored solutions for motor traders, even if they have adverse financial histories.

As an independent insurance broker, we can help you find the right motor trade policy for your needs, helping you stay insured and operational without breaking the bank.

Contact us today to see what we can find for you.