Does Getting a Car Insurance Quote Affect your Credit Score?

You need to compare alternative auto insurance quotes if you want to make sure you get value for your money. Otherwise, you may end up with an expensive insurer that charges you several times more than another similar company would. Saying that you would want to know if there is any side effect to shopping around aggressively? In other words, does getting a car insurance quote affect credit score? The simple answer to this question is no.

Credit checks by insurance companies are considered a soft pull that doesn’t affect your credit score no matter how many times they check.

This question is probably raised for the fact that applying for a credit facility like a credit card, loan or mortgage usually appear on your credit history and negatively affect the score. Each time you apply for credit you may lose like 5 points. Even though it is not a huge number it can be a problem when it is overdone. In addition, other finance companies can see all those applications and this may raise an alarm as to your creditworthiness or current eagerness to extend your credit facilities.

However, you don’t have the same problem when you get auto insurance quotes for three reasons.

  1. Getting an insurance quote isn’t the same as applying for credit. You are not borrowing money or getting into a long-term debt commitment at the end of it. So, it is not something that affects the view of future lenders.
  2. Mainly because of the different implications as described above, credit agencies don’t consider a credit check by an insurance company to be of material importance to your overall score.
  3. It is important to note that insurers don’t need check your credit each time you get a quote. Many companies are happy to give you a quote without checking your credit history and just rely on your answer in relation to how good is your credit score. They only check your credit when you accept the quote.

Hopefully, this puts your mind at rest and you feel free to shop for cheaper car insurance. It is the most effective way of reducing your premium after all that most experts highly recommend consumers to compare prices if they want to save money.

How does Credit Score Affect Car Insurance?

Perhaps the implications are more serious when credit score affects car insurance quotes. We should have a look at the effects of your credit history on your auto insurance premium while we are on the subject since insurers are allowed to check your credit score in most states. More and more insurers are moving towards heavily relying on credit history reports in their premium calculations. There are again three main reasons for it.

  1. Various studies have shown that there is a strong correlation between credit score and insurance claims. Namely, policyholders who are in financial difficulties are more likely to make a claim.
  2. This credit-claim relationship is stronger when the claims are smaller. You may ask why would an insurer be bothered with a small claim? They wouldn’t be bothered with one claim in isolation. However, they accumulate to be large sums when you add thousands of them up. The even bigger problem is the fact that these claims can double up when you add the cost of handling them on top. That is why companies are keen to charge more to drivers who are likely to claim for every little thing.
  3. It is not just about claims. Auto insurance companies don’t want to be messed around with premium payments or cancellations due to non-payment. Not only they want to receive their payments regularly, they also want a policyholder for the long term. In general, people with good financial standing cause very little problems with the insurers.

Many people feel that lower income drivers are unfairly treated as a result of credit checks. However, that is the way it is and it is unlikely to chance since insurers have successfully refuted the attempts of states trying to block credit checks.

A driver with good credit score can get as much as 25% lower premium quotes from large number of insurers, in comparison to someone with bad credit history.

In conclusion, you may want to look for a company that will offer the largest discounts for good credit when you have a good score. On the contrary, you may want to look for auto insurance companies that don’t look at credit when you have bad credit, even though you may only find few of them.

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