However, it's not as simple as having a certain score match a certain rate. Insurance companies take your full credit report and process it using an algorithm to calculate your insurance 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. Once you apply for insurance coverage, you authorize the insurer to obtain your credit and other information it needs to calculate your premium. Since getting multiple insurance quotes won't affect your credit rating, check several insurance companies to make sure you're getting the best rate.
If you have a clean driving record, you may qualify for affordable car insurance despite your credit problems. Most auto insurance companies will check your credit-based insurance score as part of the underwriting process, if you live in a state that allows it. Insurance companies say that drivers with lower credit scores are considered to be at greater risk because certain studies indicate a connection between how a person manages their finances and the likelihood that they will file an insurance claim. In Texas, Dillo Insurance offers auto insurance policies to customers with fines, accidents, interruptions in coverage or without prior coverage without checking their credit.
California, Hawaii and Massachusetts have laws that prevent insurers from using credit history to set insurance rates. A higher credit score lowers your car insurance rate, often significantly, at almost every insurance company and in most states. Auto insurance companies in most states use the applicant's credit score and credit history to calculate their premium. A credit-based insurance score doesn't measure your creditworthiness, but rather the risk you run from a car insurance perspective, based on your creditworthiness.
Most auto insurance companies will look at your credit report and use your credit rating and credit history as a single factor when setting premiums. However, some offer car insurance without a credit check because they base their car insurance premiums on other factors. While your credit situation may affect the amount you pay for car insurance, insurance companies generally can't base approvals and rates solely on your credit score. Auto insurers check your credit with a gentle method, which doesn't provide a complete credit history and doesn't affect your score.
Depending on the state and the insurer, some people can pay an average of 67 percent more in premiums for their car insurance than people with excellent credit. Some states, such as California, Hawaii, Massachusetts, Washington and Michigan, prohibit insurance companies from using credit to determine auto insurance rates.