Car Insurance Quote Do They Run Your Credit
A higher credit score decreases your car insurance rates, often significantly, with almost every company and in most states. Getting a quote, however, does not affect your credit.
Your credit score is a key part of determining the rates you pay for car insurance. Better credit often gets you better rates, and worse credit makes your coverage more expensive.
Poor credit could more than double insurance rates, according to a nationwide analysis of top insurers. In contrast, very good credit could reduce rates by as much as 24% as compared to average credit.
Nearly every insurer will check your credit. However, simply getting a quote does not have any impact on your credit score.
- How much does credit rating affect insurance rates?
- How does credit score affect car insurance rates?
- Do insurance companies check your credit?
- Does getting a car insurance quote affect your credit?
- Frequently asked questions
- Methodology
How much does credit rating affect insurance rates?
Poor credit can mean a major jump in the price of your insurance, and good credit can lead to significant savings. Poor credit raised rates 61% as compared to having average credit, based on our analysis of national rate data. Very good credit saved drivers more than 17% per year.
The effects of credit ratings vary to a degree between states, and vary heavily between companies. In some cases, your credit score could double what you pay or cut nearly a quarter off your bill.
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We found car insurance rates could vary by more than $2,400 based on credit score and insurer. For every company analyzed, the difference between poor and very good credit meant more than a $900 difference in premiums.
| Company | Annual rate with average credit | Annual rate with bad credit | Increase |
|---|---|---|---|
| Nationwide | $2,056 | $2,665 | 30% |
| Geico | $1,798 | $2,386 | 33% |
| Farmers | $2,522 | $3,567 | 41% |
| Allstate | $2,724 | $3,853 | 41% |
| American Family | $1,817 | $2,706 | 49% |
| Progressive | $2,059 | $3,222 | 57% |
| Farm Bureau Insurance | $1,534 | $2,452 | 60% |
| USAA | $1,140 | $1,937 | 70% |
| Auto-Owners | $1,606 | $2,834 | 76% |
| Travelers | $1,965 | $3,994 | 103% |
| Erie | $1,464 | $2,984 | 104% |
| State Farm | $1,259 | $2,679 | 113% |
Insurers also do not have a unified definition of credit tiers, with slightly different ranges depending on company.
How does credit score affect car insurance rates?
A driver's credit score has a noticeable effect on car insurance prices. The vast majority of insurers use credit score as a factor, including every major company.
Your credit score, also called a FICO Score, is calculated based on five factors, all related to borrowing history and current situation.
- Payment history: 35%
- Amount owed: 30%
- Length of credit history: 15%
- Credit mix (having multiple types of credit): 10%
- New credit: 10%
Credit scores range from 300 to 850. They are often divided into several tiers.
| Tier | FICO Score |
|---|---|
| Excellent | 800-850 |
| Very good | 740-799 |
| Good | 670-739 |
| Fair | 580-669 |
| Poor | 300-579 |
However, it is not as simple as a certain score matching a certain premium. Rather, insurance companies take your full credit report and run it through an algorithm to calculate an "insurance score."
An insurance score isn't a measure of how creditworthy you are, but rather how risky you are from an auto insurance perspective, based on your creditworthiness.
How much your score affects your premium may vary between states. Five states — California, Hawaii, Massachusetts, Michigan and, temporarily, Washington — ban the use of any sort of credit report as a factor in determining insurance rates. Instead, these states opt to base rates on driving record, location and other characteristics.
Do insurance companies check your credit?
To get auto insurance, in almost every case, your credit will be checked. Every major auto insurer uses drivers' credit history in some capacity, according to a 2007 report from the Federal Trade Commission.
There is a small number of insurers that don't use credit history to set rates. California, Hawaii, Massachusetts, Michigan and Washington forbid the practice.
The reason insurers check your credit is because studies have shown that credit rating tends to be a good indicator of how many claims a driver will file. That allows insurers to match more expensive rates with drivers who will likely use their insurance more.
When an insurer asks for your Social Security number in the process of providing a quote, this is to check your credit. Some insurers provide quotes without an SSN, but they will ask for one before delivering a final price.
Does getting a car insurance quote affect your credit score?
Getting a car insurance quote should not affect your credit score. The credit check process involved in getting a quote is called a "soft pull." In contrast, a "hard pull" credit check impacts your credit score.
Soft pull: Only verifies some basic information. Has no impact on your credit score.
Hard pull: Provides a full credit history and slightly lowers your credit score for a short time. If you apply to many lenders in a short period of time, a buildup of hard pulls can lower your score.
You will not receive a final price in almost every case until your credit has been checked.
Frequently asked questions
Which car insurance companies check your credit?
Every major car insurance company checks your credit before offering a binding quote. That includes Geico, State Farm, USAA, Progressive, Allstate and Liberty Mutual. Only a few insurers do not check your credit.
Does credit score affect car insurance rates?
Yes. A higher or lower credit score can have a significant impact on your insurance rates. Bad credit increased annual rates by 61% in our study.
Does getting a car insurance quote affect credit?
Getting an auto insurance quote does not affect your credit. Car insurers check your credit with a soft pull, which does not provide a full credit history and does not impact your score.
Does car insurance affect credit score?
Getting car insurance and the mechanics of your coverage should not affect your credit. If you miss payments, the insurance company might report that to credit agencies.
Does changing car insurance affect credit score?
No. Changing insurers does not have any effect on your credit score.
Methodology
Our analysis was based on data pulled from ZIP codes in all states that use credit scores as part of calculating insurance rates. Our sample driver was a 30-year-old man with a 2015 Honda Civic EX and a full coverage policy.
Insurance rate data came from publicly sourced insurer filings collected by Quadrant Information Services. Quotes should be used only for comparative purposes only.
Car Insurance Quote Do They Run Your Credit
Source: https://www.valuepenguin.com/how-does-your-credit-score-affect-auto-insurance-rates
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