Do Car Insurance Companies Check Your Credit? (2024) (2024)

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.

We at the MarketWatch Guides team have developed this guide to explain your credit-based insurance score, which credit factors impact your car insurance costs and which states don’t allow providers to conduct credit checks period. We also list the best car insurance companies for drivers that may not have the best credit.

Does Your Credit Score Affect Your Car Insurance Rate?

In states where it’s permissible for insurance companies to check your credit, your credit score can affect your rate. And if you have a lower credit score, you could end up paying more for car insurance.

How Bad Credit Affects Car Insurance Costs

The average nationwide cost of full-coverage car insurance for a driver with poor credit is $3,829 per year. This is 91% more expensive than the average for a driver with a clean record and great credit, which is $2,008 per year, according to Quadrant Information Services.

In the table below, you can also take a look at the major differences between good credit rates versus the poor credit rates from the biggest car insurance companies in the U.S. We’ve organized the table by cheapest to most expensive for car insurance companies for drivers with poor credit.

Interestingly, the cheapest companies for drivers with great credit are Erie Insurance and USAA. But, Nationwide and Geico are the most ideal choices for drivers with less-than-stellar credit.

How Other Factors Affect Car Insurance Rates

Factors that affect your car insurance rate range from preventable events, such as traffic tickets and accidents, to circ*mstances and attributes that are completely out of your control.

These include:

• Location: Insurance providers can assess lower prices if you live in an area where theft and accidents are lower.
• Age: Teen drivers and those over 65 often pay more for car insurance.
• Driving record: If you have a history of moving violations, accidents or serious charges (DUI), you’ll pay significantly more for car insurance.
• Credit history: Most states allow insurance carriers to check your credit history, and people with higher credit scores and a clean driving record enjoy the best rates.
• Gender: Data shows that women cause fewer fatal accidents than men, which results in women paying less than men for car insurance.
• Marital status: Because married drivers are statistically more financially stable than their single counterparts, insurers charge higher rates for single policyholders.
• Vehicle: The make, model, year and mileage all impact the amount you’ll pay. If it’s more expensive to cover repairs or replacements to the vehicle, your premiums can reflect this.

Why Do Car Insurance Companies Check Your Credit Score?

When you receive car insurance quotes, your carrier assesses the risk you present. One way to do this is by issuing you a credit-based insurance score. The insurer takes into account your insurance payment history and the length of your credit history to determine costs.

If you have great credit with a history of paying your insurance bills on time and you haven’t had any accidents, you’ll pay a lower insurance rate. Conversely, if you have poor credit, lapses in insurance coverage or a history of car accidents or speeding tickets, you could end up paying more.

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.

States Where Credit Scores Don’t Affect Car Insurance Rates

Several states prohibit insurance companies from checking their customers’ credit histories. These states include:

• California
• Massachusetts
• Michigan
• Hawaii

Car Insurance Options for Drivers With Bad Credit

Having a low credit score can make it difficult to secure affordable car insurance rates. However, you can reduce your insurance premium in a few simple ways. We recommend using a form of usage-based insurance, like per-per-mile or safe driving programs.

Sign Up for Safe Driving Usage-Based Insurance

Telematics allows insurance companies to monitor your driving habits for a few weeks. Depending on the provider, you can either download an app or install a plug-in device on your vehicle. The carrier will monitor your driving behaviors for a test period. If you practice safe driving habits, you could save enough money to offset a portion of the premium increase related to your credit score.

Here are some safe driving programs we recommend looking into:

• Progressive’s Snapshot®
• Geico’s DriveEasy
• Nationwide’s SmartRide®

Try Pay-per-Mile Insurance

Also known as pay-as-you-go insurance, pay-per-mile insurance charges come from the number of miles you drive every month. It’s ideal if you plan to drive short distances. And because it bases your car insurance quote on mileage, the provider might not check your credit.

Root Insurance is one of the top providers of pay-per-mile insurance. Here’s how it works. You sign up through Root’s app. After a three-week test period, during which Root monitors your driving behaviors, such as miles driven, speed and braking, Root will notify you of your eligibility. If you qualify, you can sign up immediately. Some other pay-per-mile programs we recommend are Metromile, Nationwide’s SmartMiles^® and Allstate’s Milewise.

Collect Car Insurance Discounts To Offset More Expensive Premiums

Outside of usage-based safe driving or pay-per-mile programs, you can save on more expensive poor credit car insurance by looking at car insurance discounts.

Nearly all car insurers have some discounts.

Improve Your Credit While You Pay Your Premiums

You can check out our guide on how to increase your credit score. It helps largely to know what makes up your credit score in the first place.

Know What Affects Your Credit Score

There are five big factors that impact your credit score:

• Payment history: Lenders want to see that you’re reliable with your payments, so your payment history is the most important factor for determining your credit score. It’s also why insurers can ask for higher premiums if you have a history of late payments.
• Amounts owed: How much money you owe can provide a barometer of your financial health. For example, carrying total debts in excess of $60,000 (outside of student loans) with a $40,000 annual salary signifies to the insurer that you’re too reliant on debt.
• Length of credit history: Your insurance provider uses the length of your credit history when calculating your credit-based insurance score. The longer and more reliable your credit history, the lower your premiums.
• Credit mix: A good credit score comes from showing others that you can balance a mix of credit types, such as installment loans (auto, student, mortgage) and credit cards, home equity lines of credit, and other revolving accounts.
• New credit: New credit refers to recently opened credit cards or recent credit inquiries. If you opened multiple accounts or your credit information indicates that you’ve been applying for many loans, it could result in higher rates.

Check Your Credit Often

You’re entitled to a free credit report every year. All three credit bureaus (Experian, Equifax and TransUnion) offer free credit reports at AnnualCreditReport.com. The federal government authorizes the website to issue free annual credit reports from the three credit reporting agencies.

USA.gov offers several safe and secure options for requesting your credit report:

• Online at AnnualCreditReport.com
• By calling 1-877-322-8228 (TTY: 1-800-821-7232)
• Mailing a completed Annual Credit Report request form to
  • Annual Credit Report Request Service
    P.O. Box 105281
    Atlanta, GA 30348-5281

Be on the Lookout for Credit Fraud in Your Accounts

If you notice any errors on your credit report, contact the credit bureau and follow its process for disputing items. Newly opened accounts that you don’t recognize may signal identity theft. If you notice any suspicious activity on your credit report, follow the Federal Trade Commission’s (FTC) recommendations.

• Place a fraud alert with at least one of the three credit bureaus.
• Contact the businesses that are related to the fraudulent activity and ask them to freeze your accounts.
• Change login credentials, including passwords and pins for the compromised accounts.
• Report the identity theft to the FTC using the online form or by calling 1-877-438-4338.
• File a report with your police department.

You can also monitor your credit histories more frequently through your credit card. Many companies offer free access to your FICO^® score, which can alert you to possible fraud.

Do Car Insurance Companies Check Your Credit?: The Bottom Line

Unless you’re a resident of California, Hawaii, Michigan or Massachusetts, your insurance carrier can check your credit and assign a credit-based insurance score as a risk assessment tool to predict your likelihood of filing a claim.

If you have a lower credit score, you can consent to the use of telematics to get significant discounts or qualify for a usage-based policy. Because the insurer is directly monitoring your driving habits with this device, it may not check your credit score. Remember that your credit is just one of the many factors that insurance providers use to determine risk, and many offer discounts that can help you lower your insurance costs.

Top Auto Insurance Recommendations

If you have experienced credit problems in the past, here are two of the best providers to consider:

Geico: Best for Budget-Conscious Drivers

Geico makes it easy to receive a quote within minutes through its website, mobile app or a call to an insurance agent. You can use the provider’s generous discounts to offset the higher premiums. For example, if your vehicle has an airbag, you can receive a discount of up to 23%, and if you bundle multiple policies, you can receive a discount of up to 25%.

Read more: Geico Insurance Review

Nationwide: Best for Usage-Based Insurance

Nationwide helps you lower your insurance prices through its SmartRide^® program. You’ll get a 10% discount for signing up, and you can save up to 40% within 80 days for the safe driving habits you already practice regularly. Just download and activate the app to enjoy these savings. Nationwide also offers discounts for bundling, receiving electronic statements and much more.

Read more: Nationwide Insurance Review

Do Car Insurance Companies Check Your Credit?: FAQ

Below are some frequently asked questions about car insurance companies checking your credit score.

Our Methodology

Because consumers rely on us to provide objective and accurate information, we created a comprehensive rating system to formulate our rankings of the best car insurance companies. We collected data on dozens of auto insurance providers to grade the companies on a wide range of ranking factors. The end result was an overall rating for each provider, with the insurers that scored the most points topping the list.

Here are the factors our ratings take into account:

• Industry standing (20% of total score): Our research team considered market share, ratings from industry experts and years in business when giving this score.
• Availability (10% of total score): Auto insurance companies with greater state availability and few eligibility requirements scored highest in this category.
• Coverage (30% of total score): Companies that offer a variety of choices for insurance coverage are more likely to meet consumer needs.
• Cost and discounts (25% of total score): Auto insurance rate estimates generated by Quadrant Information Services and discount opportunities were both taken into consideration.
• Customer experience (15% of total score): This score is based on volume of complaints reported by the NAIC and customer satisfaction ratings reported by J.D. Power. We also considered the responsiveness, friendliness and helpfulness of each insurance company’s customer service team based on our own shopper analysis.

Our credentials:

• 800 hours researched
• 45 companies reviewed
• 8,500+ consumers surveyed

*Data accurate at time of publication.