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Yes, credit affects car insurance premiums in every state except for California, Hawaii, and Massachusetts. Car insurance companies use credit score as one factor in determining premiums because credit history correlates with a driver's likelihood of filing a claim. Insurance companies do not use a consumer's standard credit score, though. Instead, they look at a driver's auto insurance score, which is based on the same information as a credit score, like payment history and debt.
Roughly 95% of personal car insurance companies use auto insurance scores when calculating premiums, according to FICO. People with no credit history pay an average of 67% more for auto insurance than drivers with excellent credit as a result. However, insurance companies consider factors besides credit as well. Your driving record, age, vehicle, and location can all affect your premium, too.
It’s also important to realize that you are still protected from unfair practices, even when car insurance companies are allowed to use credit in your state. For instance:
- Insurance companies in most states are not allowed to deny coverage simply because of an insurance score.
- Many states allow drivers to request that their insurance score not be considered if it was negatively affected by a major life event like a divorce, a death in the family, or an involuntary job loss. If your state has such laws, your insurance company is required to comply.
Finally, the fact that credit scores and insurance scores are based on similar information means that credit-score improvement can result in cheaper car insurance premiums, too. You can check your latest credit score for free with WalletHub and get customized advice for how to improve your credit.
People also ask
Do car insurance companies check credit?
Yes, car insurance companies check credit, except in Hawaii, California, Massachusetts, Michigan, and Washington 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...
read full answer by WalletHub, Financial CompanyWhat are some good no-credit-check car insurance companies?
No-credit-check car insurance companies are rare, since almost all insurers use credit to calculate premiums where allowed by state law. Examples of car insurance companies that don’t check credit include Dillo Insurance in Texas and Cure Auto Insurance in Pennsylvania, New Jersey and Michigan. No-credit-check car insurance companies tend to be relatively small and operate at the regional or local level. Because their customer base is mostly high-risk drivers, they are also likely to be...
read full answer by WalletHub, Financial CompanyDid we answer your question?
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