Does shopping for car insurance lower your credit score?

It's true that insurance companies check your credit score when they give you a quote. However, what they're doing is called “soft searching,” a type of query that won't affect your credit rating. Insurance quotes don't affect credit ratings. Although insurance companies check your credit during the quote process, they use a type of inquiry called a “soft request” that isn't presented to lenders.

You can receive as many inquiries as you want without negative consequences for your credit rating. This is because the insurance company isn't looking at your real score; it's just using information from your credit report. Nationwide uses a credit-based insurance score to determine premiums. Studies show that using this score helps us better predict insurance losses.

In fact, 92% of all insurers now consider credit when calculating auto insurance premiums. Find out how you can save on costs by taking advantage of affordable car insurance with discounts. While using credit-based insurance scores to calculate rates is legal at the federal level, insurance companies generally cannot use credit history as the sole reason to increase rates or deny or cancel a policy. Insurers use insurance credit ratings to predict how likely you are to file a claim, and a low score usually translates to higher insurance rates.

The influence of an auto insurance company on your credit score seems, at first glance, to be somewhere in between. However, credit-based insurance ratings are generally created to help insurance companies understand the likelihood that someone will file insurance claims that cost the company more than it collects in premiums. This is because the credit score is used to estimate how likely you are to pay your debts, while the credit-based insurance score analyzes the likelihood that you will file an insurance claim. Insurers obtain their driving and insurance records from their Comprehensive Loss Underwriting Exchange (CLUE) car report.

When you're a new customer, most companies will review your score to help calculate car insurance rates. Many auto insurance companies use credit-based insurance scores to decide who to offer insurance to and how much to charge. When determining your car insurance credit score, gender, marital status, age, ethnicity, address, or income are never taken into account. Since getting multiple insurance quotes won't affect your credit rating, check several insurance companies to make sure you're getting the best rate.

Having poor credit affects insurance rates, but comparing prices won't affect your credit rating, as there's no strong credit attraction when you compare car insurance quotes. While insurers differ as to what a poor insurance credit score is, using the example above, 625 or lower would be considered bad credit. California, Hawaii and Massachusetts have laws that prevent insurers from using credit history to set insurance rates. No, there's no strong credit attraction when you request an auto insurance quote, so comparing prices won't affect your credit rating.

In addition, some states prohibit or strictly limit the use of credit-based insurance scores for use in car insurance decisions. For example, one insurance company might decide that a score of 750 or higher allows for the lowest car insurance rates, while another might require a score of 700 or more to receive the best price.

Kara Munsell
Kara Munsell

Infuriatingly humble coffee buff. Passionate burrito junkie. Unapologetic social media ninja. Avid music geek. Passionate bacon ninja. Subtly charming tv trailblazer.

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