Do Car Insurance Quotes Affect Your Credit Score?

Getting a car insurance quote doesn’t affect your credit score, but car insurance companies check your credit history to understand how “risky” you are to insure. But they don’t use your FICO credit score — insurers instead calculate something called your “credit-based insurance score.” This score represents your likelihood of paying bills on time and provides a snapshot of factors like your payment history, credit history length, and unpaid debt. Insurers use this information to decide your overall financial risk.
Besides your credit-based insurance score, insurers also look at many other factors — such as your driving history, age, and location — to determine your car insurance premium.
Keep reading to learn why car insurance companies check credit, the difference between a credit score and a credit-based insurance score, and ways to improve your credit before shopping around for insurance quotes.

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Why Do Car Insurance Companies Check Credit?

During the car insurance quoting process, insurance companies often look at your credit history — but not your actual credit score — to help determine your level of risk and your auto insurance rates.
But a growing number of states now restrict or prohibit insurers from considering credit during the quoting process. Currently, California, Hawaii, Maryland, Michigan, and Massachusetts ban insurers from using credit history when determining rates. And several other states, like Alabama, Delaware, and Florida, prohibit insurers from using a lack of credit history as a rating factor.

How your credit history affects premiums

The chart below shows how average monthly rates vary between credit tiers.

The average monthly insurance rate for drivers with excellent credit is around $109 per month, compared to $288 per month for poor credit. And even if your credit is fair, your average monthly rate could be 50% cheaper than someone with poor credit.
But if you live in a state where insurers can use credit as a scoring factor, raising your credit can result in significant savings on your auto policy.

What Are the Types of Credit Inquiries?

A credit inquiry is a request — often by banks, credit card companies, or insurers — to look into your credit history. Depending on the nature of the application, your credit file will undergo a “soft” or “hard” inquiry. Here’s the difference between the two:

• Soft inquiry: Sometimes called a “soft pull,” this type of inquiry allows the requesting company to see your credit file, including any existing accounts — but it doesn’t affect your credit score. Insurance companies use a soft inquiry during the quoting process.

• Hard inquiry: A hard pull occurs when you apply for credit, such as a loan or credit card, and usually affects your credit score, as most scoring models show how often and recently you applied for credit.

Under federal law, insurance companies can check your credit without permission — unless you live in a state where restrictions apply. When shopping for car insurance, ask your agent or the insurance company how it will use your credit information.

Credit Scores vs. Credit-Based Insurance Scores

Credit scores and credit-based insurance scores are similar — both scores help determine risk, but there are some differences. Let’s look at how the two compare.

Credit scores

A credit score predicts your ability to repay debt and determines your risk level when you apply for financial credit, like a home loan. You may have different credit scores based on the model each company uses (FICO is one of the most common). Your score is based on a number of factors, like types of accounts, payment history, new applications for credit, and past bankruptcies.
Lenders look at your credit score to determine your loan rates and qualifications. If you have a poor credit score, lenders may decline your application for a loan or credit card.

Credit-based insurance scores

When an insurance company checks your credit history, the company doesn’t look at your credit score. Instead, auto insurers create a credit-based insurance score — also called an insurance score. This score helps insurers determine the likelihood that you’ll file an insurance claim, which they use to set auto and home premiums.
People with good scores get the best car insurance rates — but keep in mind that other factors, like your driving record and claims history, influence rates as well.

Can you check your credit-based insurance score?

Unlike traditional credit scores — which consumers legally have the right to check at any time with a credit report — you can’t easily check your credit-based insurance scores. To make matters more confusing, every auto insurer calculates this score differently, meaning your credit-based insurance score could differ from insurer to insurer.
The insurance company you got your insurance quote through could tell you your credit-based insurance score or provide you with a contact for where to get the information, but many won’t. You can also ask if the company used an insurance score to calculate your rate and why you received the score.

Should You Improve Your Credit Score Before Getting Auto Insurance?

Your credit score likely won’t prevent you from getting an insurance policy. Since most states require auto coverage, waiting until your credit score improves to get auto insurance isn’t ideal.
If your credit rating isn’t where you’d like it to be, there are ways to improve. And once your score goes up, you may be able to get a better rate with your existing insurance company or another insurer. Consider these tips:

• Check your credit score regularly. Monitor your score closely to catch errors quickly and look for opportunities for improvement. You can get a free copy of your credit report or pay for a credit score service.

• Pay your bills on time. Your payment history makes up 35% of your FICO credit score, so staying on top of your bills is critical. A single late payment could drop your score by 100 points or more.

• Lower your credit use. Keep your credit card balances low. As a best practice, try to keep your total credit card balances under 10% of your total credit limits.

• Limit hard inquiries. Every time you apply for credit, your credit score takes a small hit. Limit how often you apply for a new loan or credit card.

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FAQs About Car Insurance and Credit Scores

Sources

1. Insurance Information Institute, “Insurance Scoring,” Accessed February 15, 2024.

2. NCSL, “States Consider Limits on Insurers’ Use of Consumer Credit Info,” Accessed February 15, 2024.

3. CFPB, “What’s a credit inquiry?,” Accessed February 15, 2024.

4. Wisconsin OCI, “Understanding How Insurance Companies Use Credit Information,” Accessed February 15, 2024.

5. CFPB, “What’s a credit score?,” Accessed February 15, 2024.

6. CFPB, “What Is the Difference Between Credit-Based Insurance Scores and Credit Scores?,” Accessed February 15, 2024.