Does car insurance look at credit scores?
If you've ever applied for a credit card, leased a car or gotten a mortgage for a home, you know that credit scores count. You may be surprised to find out they can also affect your car insurance premiums much the same way your driving record, marital status and payment history can.
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.
Depending on your state, having a low credit score can increase your rate by as much as 137%. According to our rate estimates, a 35-year-old driver with good credit can find car insurance for about $2,008 per year on average. A poor score increases it further to $3,829 annually.
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.
An insurance company can only use your credit-based insurance score as one factor in its underwriting process. It will be considered with several other factors that vary by insurance type.
The most affordable auto insurance for drivers with bad credit is from Nationwide, GEICO or USAA, according to our research.
FICO is an acronym that stands for: Fair Isaac Corporation, the company that developed the FICO® credit scoring. FICO® credit scores are the auto industry standard for determining a potential buyer's creditworthiness.
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.
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.
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.
Does Progressive check credit?
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.
Customers belonging to lower credit tiers are expected to file more claims based on statistical analysis, so they receive lower insurance scores — and in turn, higher rates.
Your insurance rate won't go up as a result of your first otherwise surchargeable, at-fault accident. Subsequent occurrences do not qualify for Accident Forgiveness. Accident Forgiveness eligibility is determined by your specific policy type, as well as your state laws and regulations.
Do Car Insurance Companies Do Hard or Soft Credit Checks? Insurance providers usually conduct soft pulls of your credit history. This data gives them a snapshot of your information, but it doesn't lower your credit score like frequent hard pulls can. Hard pulls happen when you apply for a car loan or credit card.
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.
Paying utilities, rent and cell phone bills can help build credit if they're reported to the credit bureaus. If certain bills aren't reported to the credit bureaus, you can consider using a third-party service to report your payments.
- Nationwide – Good for Usage-based or Mileage-based Insurance.
- USAA – Best for Military Members & Veterans.
- American Family – Best for Low Level of Complaints.
- Geico – Best Car Insurance Rates for Drivers with Poor Credit.
- Westfield – Best Family Discounts.
USAA, Nationwide, Travelers, Erie, Geico and Progressive are the cheapest car insurance companies nationwide, according to our analysis.
According to the company, a score of 770 or better is considered good and will get you favorable rates. A score of 500 or below is considered poor and could result in higher premiums or being turned down for coverage.
We understand that life happens, and we're here to help you get back on the road with an auto loan for bad credit that fits your budget and financial situation. Yes, it is possible to get a car loan with a credit score of 500, but it can be infinitely more challenging to find a lender willing to approve the loan.
What is a fair credit score to buy a car?
Key Takeaways. Your credit score is a major factor in whether you'll be approved for a car loan. Some lenders use specialized credit scores, such as a FICO Auto Score. In general, you'll need at least prime credit, meaning a credit score of 661 or up, to get a loan at a good interest rate.
While you technically can get approved for a loan with a 550 credit score, you'll likely face more challenges and pay significantly more for the loan than if your score was higher. Most lenders won't consider borrowers with scores less than 580 – but you may still be able to find one if you know where to look.
Cheapest car insurance companies for drivers with bad credit
Based on our research, Geico, Nationwide, Mercury, American Family and Travelers are some of the cheapest major providers for drivers with bad credit.
Credit-based insurance scores (discussed in detail below) are based on information in your credit report. The first thing you should know is that if GEICO does obtain a credit-based insurance score as part of calculating your insurance quote, the inquiry is labeled as being from the insurance company.
Some auto insurance companies use credit-based insurance scores to help them decide whether to offer someone an insurance policy and the premiums for the policy. These scores are based on one of your consumer credit reports. However, they're not the same as the credit scores that lenders use.
