Do you need a good credit score for insurance?
Car insurance companies use credit scores when setting rates because drivers with lower scores are more likely to file claims. To improve your credit score and save on car insurance, start monitoring your credit and aggressively pay down credit card debt.
How much your score affects your rates varies between states. 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.
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.
California
Insurance companies in California don't use credit-based scores or your credit history for underwriting or rating auto policies, or setting rates for homeowners insurance. As a result, your credit won't impact your ability to get or renew a policy, or how much you pay in premiums.
| Bad Credit Car Insurance Company | Average Monthly Cost for Poor Credit Drivers | Average Annual Cost For Poor Credit Drivers |
|---|---|---|
| Nationwide | $173 | $2,072 |
| Progressive | $331 | $3,977 |
| Erie Insurance | $227 | $3,319 |
| American Family Insurance | $240 | $2,886 |
When you request auto insurance quotes, some providers ask for your Social Security number. In states that allow it, providers use your Social Security number to review your credit report and determine your credit-based insurance score. It's one of the factors insurers in most states use to determine your premiums.
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.
Specific things that Geico looks for in your credit history include bankruptcies, late payments, and foreclosures. These will likely result in higher premiums.
You can improve your credit-based insurance score.
Make payments on time. Pay bills, taxes and fines/fees as agreed. If you are behind on payments, catch up and stay current. Keep balances on credit cards as low as possible.
In most states, insurers can use your credit-based insurance score to determine your premiums.
Can your insurance cost go higher if credit score is low?
On average, drivers with poor credit pay 114 percent more for full coverage car insurance than those with excellent credit.
In most states, your credit history and credit-based insurance scores can impact whether you're offered a homeowners insurance policy and how much you'll pay in premiums. An insurance company might not be allowed to deny your application or renewal based solely on your credit.
A credit-based insurance score allows insurers to quote the fairest, most appropriate rate for every customer. About half of our existing customers pay a lower premium based on their credit score.
Insurance scores range between a low of 200 and a high of 997. Insurance scores of 770 or higher are favorable, and scores of 500 or below are poor. Although rare, there are a few people who have perfect insurance scores. Scores are not permanent and can be affected by different factors.
There are some differences around how the various data elements on a credit report factor into the score calculations. Although credit scoring models vary, generally, credit scores from 660 to 724 are considered good; 725 to 759 are considered very good; and 760 and up are considered excellent.
So, if you're worried about car insurance companies pulling your credit negatively impacting you, rest assured they only do a soft pull. Credit takes into account hard inquiries which are things like applying for loans.
The short answer is no. There is no direct affect between car insurance and your credit, paying your insurance bill late or not at all could lead to debt collection reports. Debt collection reports do appear on your credit report (often for 7-10 years) and can be read by future lenders.
U.S. Drivers With Poor Credit Pay Twice as Much for Car Insurance as Those With Exceptional Credit. The Zebra's analysis of 61 million car insurance rates shows that drivers with poor credit (those with a credit score lower than 580) pay about $2,729 per year for car insurance.
The most affordable auto insurance for drivers with bad credit is from Nationwide, GEICO or USAA, according to our research.
According to a survey by Conning and Co., over 92% of all major insurers, including GEICO, use credit-based insurance scores to help determine insurance premiums in most states.
Can insurance agents see your credit score?
Yes. A federal law, the Fair Credit Reporting Act (FCRA), states insurance companies have a “permissible purpose” to look at your credit information without your permission. Insurance companies must also comply with state insurance laws when using credit information in the underwriting and rating process.
An insurance score is a score calculated from information on your credit report. 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.
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.
Yes, State Farm does use your credit score as a factor when determining your car insurance rates, as do most major insurers.
If you leave out information in the quoting process about accidents you've been in (even minor ones), your policy rate may be higher. If you forget to provide details about your significant others' driving history, such as speeding tickets, this may lead to a higher rate.
