Does getting an auto insurance quote hurt your credit score?

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Here's what you need to know...

  • In most states, car insurance carriers can use a driver’s credit report to determine their premium
  • Having simply okay or even poor credit can contribute to you paying a higher premium
  • Studies show drivers with lower credit scores are more likely to file claims and get into accidents which are riskier for the insurance carrier
  • Drivers can take steps to help improve their credit score which can decrease the car insurance rates that they pay over time

Most drivers are aware that a car insurance carrier will check their driving record before offering them a policy and providing them with a quote.

However, some do not know that many carriers will also check your credit score to help determine your policy premium. While this may come as a surprise, car insurance companies do so to help protect their interests.

If you have imperfect or horrible credit, you may be worried about finding a car insurance quote that you can afford. The good news is that using an online price comparison allows you to compare several different insurance companies, policies, and rates all in one convenient place.

Start compiling your options so you can select the policies that work best for you, no matter your credit score. Enter your zip code into our FREE comparison tool to get started!

Can auto insurance carriers legally check credit?

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At first glance, the practice of a car insurance company checking your credit report or score may seem possibly illegal or like an invasion of privacy. Many consumers wonder why the insurance company needs to know about a driver’s credit history.

However, in most states, it is legal. FICO reports that approximately 95 percent of car insurance carriers check credit and use it to determine risk classifications for underwriting in states where they are legally allowed.

The result of this process is a credit-based insurance score. A poor or just okay credit score could have a negative impact on your car insurance rate. Car insurance companies will look at several different items on your credit report to help them determine your premium including:

  • Payment history which accounts for about 40 percent of your credit-based score
  • Length of credit history, accounting for approximately 15 percent of your total score
  • Accounts in collections, if any
  • Outstanding debts which account for another 40 percent of your insurance score
  • Any previous bankruptcy filings
  • New credit inquiries accounting for about 10 percent of your insurance score
  • Finally, credit mix will account for about 5 percent of your insurance score

Why does credit matter for car insurance quotes?

While many consumers are unaware of this fact, car insurance companies have been utilizing credit reports and scores to help determine rates for over two decades. Auto insurance carriers claim that these pieces of information are a reliable indicator of the risk they are assuming by insuring a driver.

Various studies reveal that drivers with higher credit scores are less likely to file claims while drivers with lower credit scores are at a higher risk to have accidents and file claims.

Some car insurance carriers do not use credit scores to determine car insurance rates, although, most do.

What information can’t be used to determine a credit-based insurance score?

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  • Age
  • Income
  • National Origin
  • Race
  • Color
  • Gender
  • Marital status
  • Employment, occupation, and income history
  • Where you live
  • What interest rates you pay
  • Rental agreements
  • Child or family support obligations
  • Certain types of inquiries into your credit report, such as account review inquiries, pre-employment or promotional inquiries

Will getting auto insurance quotes hurt my credit score?

Unlike applying for various lines of credit such as an auto loan, a home mortgage, or a new credit card, getting car insurance quotes will not have an impact on your credit score.

In fact, it shows up as a “soft pull,” which means you are usually the only one who can see it.

These soft pulls which also include employment credit checks, promotional offers, and a credit report, do not affect your credit score or report like a hard pull (i.e., applying for credit).

No matter how many quotes you obtain on auto insurance policies, you can be assured that your credit score will not be affected.

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Hardship Exemption

These exemptions are designed to help people who have recently faced extraordinary life circumstances such as:

  • Unemployment
  • Identity theft
  • Divorce
  • Serious illness
  • Death of a spouse

How can I improve my credit score?

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If you are someone who has less than perfect credit, you may be interested in improving your credit score to achieve better auto insurance premiums. While this is an achievable goal, it will not happen overnight.

Consider the following ways of improving your credit score:

  • Get current and stay current on any outstanding debts
  • Avoid applying for new lines of credit whenever possible
  • Pay your bills on time
  • Keep low balances on your credit cards
  • Do not close unused credit accounts
  • Obtain a copy of your credit report and verify it for accuracy
  • Dispute in inaccuracies you might find

It can be frustrating to learn that your credit score could be negatively impacting the amount you pay for car insurance. However, many consumers are relieved to find out that getting car insurance quotes does not show up on their credit reports or have an effect on their credit scores.

To improve the car insurance premium that you pay, try using an online price comparison tool. Comparing rates and finding one that you can afford has never been easier than with our online comparison tools. Just enter your zip code below to get started!

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