Does Car Insurance Affect Credit Score?
Does Car Insurance Affect Credit Score? Does unpaid car insurance go on your credit? Does just looking for auto insurance affect your credit score?
There’s a definite relationship between credit score and auto insurance rates, but it really just works one way. While your credit won’t likely be affected by late payments or a canceled policy, your existing credit history will impact how much you’ll pay for auto insurance.
Does Car Insurance Affect Credit Score?
Can car insurance affect your credit score? No, it’s highly unlikely that your payment history for auto insurance will be reported to the credit agencies. Your driving history and claims history are important, but they won’t get reported to your credit.
When you get quotes for auto insurance, insurers will run a credit check. But, it’s a soft hit. That means it won’t report to your credit or affect your score at all.
If you end up with a bad insurance record, you may need high-risk auto insurance, but you won’t have to worry about lowering your credit score. However, it absolutely works the other way around.
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.
How much your score affects your premium may vary between states. California, Hawaii and Massachusetts ban the use of any sort of credit report as a factor in determining insurance rates. Instead, those states opt to base rates on driving record, location and other characteristics.
Frequently asked questions
1: 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.
2: 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.
3: 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.
4: 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.
5: Does changing car insurance affect credit score? No. Changing insurers does not have any effect on your credit score.