Do insurance companies take your credit score into account? (2024)

Do insurance companies take your credit score into account?

Most insurance companies using credit information will include it as a factor in determining your rate. For example, someone with a relatively high credit score may pay a lower premium than someone with a relatively low credit score.

Most insurance companies use your credit history to help them decide whether to sell you insurance and how much it will cost.

The credit-based insurance score models used by insurers are designed to predict the risk of loss. Insurers use credit-based insurance scores for underwriting to assign consumers to a pool based on risk and then for rating by deciding how to adjust the premium up or down.

According to our estimates, drivers pay 46% to 137% more for having poor credit, depending on the state. Each state determines how its car insurance companies can set rates, including how they use a credit-based insurance score. This means having bad credit costs drivers more in some states than others.

Typically, the higher your credit rating, the less you will pay for home insurance in the states where credit is considered a rating factor. Although it is only one factor in setting rates for home insurance, data shows that the credit-based insurance score is an important one.

670 to 739: Good Credit Score

Lenders generally view those with credit scores of 670 and up as acceptable or lower-risk borrowers.

Car insurance companies consider more than a dozen rating factors when calculating your premium. Although your credit score can significantly impact your rate, some other rating factors include the make and model of your vehicle, your driving record, claim history and how you use your car.

And when it comes to credit, 850 is the highest the FICO^® Score^☉ scale goes. For more and more U.S. consumers, practice is making perfect. According to recent Experian data, 1.54% of consumers have a "perfect" FICO^® Score of 850.

Do insurance companies do hard credit checks?

Insurance companies can check your credit history and use it to set your premium unless you live in California, Hawaii, Massachusetts or Michigan.

Yes, Geico does use your credit score as a factor when determining your car insurance rates, as do most major insurers. However, credit checks by auto insurers do not harm your credit score and are only done in states where it is legal for your credit score to affect your rates.

Credit information is very predictive of future accidents or insurance claims, which is why Progressive, and most insurers, uses this information to help develop more accurate rates. Each insurer has its own method for evaluating this credit information.

Most insurance companies using credit information will include it as a factor in determining your rate. For example, someone with a relatively high credit score may pay a lower premium than someone with a relatively low credit score.

In most states, insurers can use your credit-based insurance score to determine your premiums.

While it is generally assumed that credit risk is borne by the insured or ceding insurer (under a reinsurance contract), insurance and reinsurance companies also bear credit risk.

Improving your credit score takes time and regular payments. If you're starting with no credit, you might see improvements in a few months. However, fixing serious issues like bankruptcy can take over six years.

Because each independent rating agency has its own rating scale, the same insurance company can receive different ratings among the various agencies. The four major insurance company rating agencies in the U.S. are A.M. Best, Moody's, Standard & Poor's, and Fitch.

Most major car insurance companies like GEICO, Progressive and State Farm factor in your credit score when giving you a quote. However, if you live in California, Hawaii, Massachusetts, or Michigan, you're in luck—these states don't allow credit history to affect your auto insurance rates.

Four states — California, Hawaii, Massachusetts and Michigan — ban companies from using your credit report to determine insurance rates. Instead, companies in these states base rates on your driving record, location and other characteristics. You may also pay more for insurance if you don't have a credit history.

Does my insurance agent see my credit score?

Are insurers completely free to access and use your credit history? A few states prohibit insurers from using consumer credit information – California, Massachusetts and Hawaii for auto insurance and Maryland and Hawaii for homeowners insurance.

Highlights: While older models of credit scores used to go as high as 900, you can no longer achieve a 900 credit score. The highest score you can receive today is 850. Anything above 800 is considered an excellent credit score.

A perfect credit score of 850 is hard to get, but an excellent credit score is more achievable. If you want to get the best credit cards, mortgages and competitive loan rates — which can save you money over time — excellent credit can help you qualify. “Excellent” is the highest tier of credit scores you can have.

You can borrow from $1,000 to $100,000 or more with a 700 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

Most insurers use credit checks to create a credit-based insurance score to help set your rate. Some insurers provide auto insurance with no credit check, which might seem appealing if you have a poor credit history.