Yes, car insurance companies check credit, except in Hawaii, California and Massachusetts, where it is illegal. Getting car insurance quotes and buying a policy will not hurt your credit, though, because insurers use what’s called a soft pull, rather than a hard inquiry. The credit-scoring company FICO estimates that 95% of car insurance companies use insurance scores as a factor in determining prices.
Insurance scores are different than credit scores, but they rely on the same basic information: your credit history. The difference is that insurance scores are designed to determine your risk of filing a claim using data from consumers’ major credit reports.
Your insurance score is only one of many factors that affect your car insurance rate, but it can carry a lot of weight. Drivers with no credit pay 67% more on average than drivers with excellent credit. In New Jersey, the state where credit affects car insurance the most, rates are twice as expensive for drivers with no credit compared to those with excellent credit.
Car insurance companies have good reason to check credit, since the Federal Trade Commission has shown that insurance scores effectively predict risk. On the other hand, the FTC admits that insurance scores are correlated with race and ethnicity, leading some states to ban their use. Similarly, some states, like Washington, forbid insurers from denying or cancelling a customer based solely on credit.
No-credit-check car insurance companies do exist, but they usually serve smaller geographical areas. It’s also important to note that if you have a low credit score, a no-credit-check company still might not be the cheapest option, since insurers consider a variety of factors in determining premiums.
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